The (Normal) Rate of Capacity Utilization at the Firm Level

Michalis Nikiforos

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper examines the endogeneity (or lack thereof) of the rate of capacity utilization in the long run at the firm level. We provide economic justification for the adjustment of the desired rate of utilization toward the actual rate on behalf of a cost-minimizing firm after examining the factors that determine the utilization of resources. The cost-minimizing firm has an incentive to increase the utilization of its capital if the rate of the returns to scale decreases as its production increases. The theory of economies of scale provides justification for this kind of behavior. In this manner, the desired rate of utilization becomes endogenous.

Keywords: Kaleckian; Long Run; Economies of Scale; Utilization (search for similar items in EconPapers)
JEL-codes: B20 B50 D21 E11 E12 E22 E25 (search for similar items in EconPapers)
Date: 2012-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The (Normal) Rate of Capacity Utilization at the Firm Level (2013)
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