On the Economics of Multiplant Operation: Some Concepts and an Example

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 TEXTBOOK microeconomic theory has mostly neglected the more refined aspects of the economic problems associated with the existence of firms operating multiple plants. Ordinarily the neoclassical firm is simply modelled in its long rung static equilibrium given by the minimum point on the long run average cost function. At this point the firm operates plants of optimal size, the outputs of which are determined by the minimum point on their respective U-shaped average cost functions. The number of plants operated by each firm in optimum is thus given by a division of optimal firm-output with optimal plant-output. Since the relevant cost functions in ordinary circumstances should not, for any extended period of time, significantly differ from each other in different countries one would expect plant sizes to be approximately equal in a given industry in different countries.