Micro, Green

As a firm gets larger costs gets smaller (ec. of scale)

1.     indivisibilities - photocopier.

2.     Specialisation - A. Smith - you do what you are the best at and learning by doing.

3.     Physical economies (double the size, volume goes up by 4 times)

4.     Financial economies (buying bulk, not a saving to an economy). There are co-ordination problems.

The efficient input path is only valid in Lr, in Sr you can only vary labour. So you keep capital horisontal and move in an horisantal line.