It is possible to replicate physical activities. Replication implies that
the aggregate production function representing a competitive market should
be characterized by homogeneity of degree one in all of its conventional (that is,
rival) inputs. If we represent output in the form Y = AF(K, H, L), then doubling
all three of K, H, and L should allow a doubling of output. There is no
need to double the nonrival inputs represented by A because the existing pieces
of information can be used in both instances of the productive activity at the
same time. (The assumption that the market is competitive means that the
existing activity already operates at the minimum efficient scale, so there are no
economies of scale from building a single plant that is twice as large as the
existing one.)
It is possible to replicate physical activities. Replication implies thatthe aggregate production function representing a competitive market shouldbe characterized by homogeneity of degree one in all of its conventional (that is,rival) inputs. If we represent output in the form Y = AF(K, H, L), then doublingall three of K, H, and L should allow a doubling of output. There is noneed to double the nonrival inputs represented by A because the existing piecesof information can be used in both instances of the productive activity at thesame time. (The assumption that the market is competitive means that theexisting activity already operates at the minimum efficient scale, so there are noeconomies of scale from building a single plant that is twice as large as theexisting one.)
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