Distinguish between increasing return to scale, constant return to scale and decreasing return to scale

 Increasing Returns to Scale

Increasing returns to scale is closely associated with economies of scale Increasing returns to scale occurs when a firm increases its inputs, and a more-than-proportionate  increase in production results. For example, in year one a firm employs 200 workers, uses 50 machines, and produces 1,000 products. In year two it employs 400 workers, uses 100 machines (inputs doubled), and produces

2,500 products (output more than doubled).

When input prices remain constant, increasing returns to scale results in decreasing long-run average costs (economies of scale). A firm that gets bigger experiences lower costs because of increased specialization, more efficient use of large pieces of machinery (for example, use of assembly lines), volume discounts, and other advantages of producing in large quantities.

  

Decreasing Returns to Scale

Decreasing returns to scale is closely associated with diseconomies of scale. Decreasing returns to scale happens when the firm's output rises proportionately less

  

than its inputs rise. For example, in year one, a firm employs 200 workers, uses 50 machines, and produces 1,000 products. In year two it employs 400 workers, uses 100 machines (inputs doubled), and produces 1,500 products When input prices remain constant, decreasing returns to scale results in increasing long-run average costs (diseconomies of scale). An organization may become too big, thus creating too many layers of management, too many departments, and too much red tape. This leads to a lack of communications, inefficiency, delays in decision-making and inefficient production.

Constant Returns to Scale

Constant returns to scale occurs when the firm's output rises proportionate to the increase in inputs. Problem: In the example above, after doubling the inputs in year one, what would output have to be in year two for the firm to experience constant returns to scale? Solution: 2,000 products. At 2,000 products, the output doubles. Because the inputs double, the increase in production is proportionate. By definition, this equates to constant returns to scale.

Market structure of the following product(i)water supply in Dhaka city(ii)Rice market(iii)Mobile telephone service (iv)Banking services?

 (i)water supply in Dhaka:

 The Dhaka Water and Sewerage Authority (DWASA) currently supplies water to about 70% of the population of the Dhaka City Corporation (DCC) and its suburbs through a distribution network. The four million people living in the 3,000 Dhaka slums also rely on DWASA's piped water, as there is no other reliable source of water available; but public standpipes are always remotely located. DWASA's sewerage network covers only about 1 1 0 km2. Trunk sewers suffered major damage during the 1998 and 2004 floods; as a result, only about 40% of the waste water generated by the existing 50,000 Connections currently reach the waste water treatment plant. High standard buildings dispose of their black waters in septic tanks and their grey waters in storm water drains. Lower income households rely DWASA is also responsible for developing and operating the underground storm water drainage system that covers an area of about 140 km2; Dhaka City Corporation is in charge of surface

drains. Natural channels and wetlands that help Dhaka cope with storm water flows are rapidly being destroyed by the urban development. Public health is affected by the limited coverage of both the water supply and waste water facilities and recurrent flooding. DWASA needs to update its water supply master plan to help protect existing sources, develop new ones, and rationalize its distribution network. DWASA also needs to update its sanitation strategy and its wastewater management master plan, as well as its storm water drainage master plan, to ensure that minimum retention capacity of storm water flows is

reserved in the city whose population is expanding at a rate of almost 0.8 million per year.

The Government of Bangladesh has requested assistance from the World Bank to prepare the proposed

project to improve water supply, sewerage disposal, and sanitation and storm water drainage facilities in Dhaka.

(ii) Rice market:

 Rice is very important because about 40% farmers in Bangladesh are producing rice. By which most people in Bangladesh regulate their living condition. Rice is the seed of the monocot plant  Orzo sativa. As acereal grain, it is the most important food for a large part of the world’s human population, especially in East and South Asia, the Middle East, Latin America, and the West Indies. It is the grain with the second-highest worldwide production. Rice production increases must be achieved at a faster rate than in most other countries, while the land planted to rice is not expanding. But in our country there is some major factor which is affect on production of rice price. There are some causes which are affecting on our production of rice Such as 1.All kinds of natural disaster. Rice price is high because we are not self-sufficient in producing rice and we import rice from many countries. On the other hand we are some facing some problem on production process such down technology corruption , syndicate , middle man .lack of improve technology ,lack of capital , hybrid and lack of supply and inputs. Mostly consumers and producer are affected.

(iii) Mobile phone services:

 There is a wide choice of mobile telephone services. You can choose different types of services; including pre-pay or contract services. There are also different pricing options and additional services to opt for, as well as different makes, models and types of mobile phone handsets to choose from.

Before you buy, you should carefully examine what each mobile phone services offers to determine what's best for you and your budget.

(iv) Banking services:

 Banking service in Bangladesh is characterized as a highly competitive and highly regulated sector. With a good number of banks already in operation and a few more in the pipeline, the market is becoming increasingly competitive by the day.With the global slowdown in the face of rising competition, the commercial banks are constantly looking for ways to develop their market and product offers to remain ahead of others. A significant amount of regulation by Bangladesh Bank prevents the scope of introducing newer products into the market and thereby restricts a banks’ ability to outperform others with a diversified product range.

 However, recent trends have shown banks shifting away from vanilla products (basic products) towards higher value added products that are highly structured, to meet the needs of the clients.

 Involvement of the banking sector in different financial events is increasing day by day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases, the banking organizations are coming with innovative ideas. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide to their clients.