- Economies of scale, diseconomies of scale, constant returns to scale.Efficiency in production.Economies of scope and how to maximize profit when there’re two production plants,long-run equilibrium-Include Coverage from Chapters 2-6 of Science of Success
I came across this article today discussing the upcoming purchase of El Paso Corp, by Kinder Morgan, two of the largest natural gas pipeline operators in North America. This will result in a combined total of around 80,000 miles of pipeline across the US. The goal behind this purchase is the ability to demand higher transport fees for use of their pipelines. This is a great example of Economies of Scale in action. When the companies were considered rivals in the marketplace, they often had to compete with each other, which resulted in lower prices for their customers. In addition to charging higher prices, their combined effort will enable them to service larger areas and expand into newly developed shale fields, which are quickly becoming a hot spot for oil and natural gas production.
I came across this article today discussing the upcoming purchase of El Paso Corp, by Kinder Morgan, two of the largest natural gas pipeline operators in North America. This will result in a combined total of around 80,000 miles of pipeline across the US. The goal behind this purchase is the ability to demand higher transport fees for use of their pipelines. This is a great example of Economies of Scale in action. When the companies were considered rivals in the marketplace, they often had to compete with each other, which resulted in lower prices for their customers. In addition to charging higher prices, their combined effort will enable them to service larger areas and expand into newly developed shale fields, which are quickly becoming a hot spot for oil and natural gas production.
http://www.reuters.com/article/2011/10/17/us-kindermorgan-idUSTRE79F20Y20111017?feedType=RSS&feedName=topNews&rpc=71&google_editors_picks=true