Size and structure of return to scale in revenue function and cost function

Abstract

Common revenue function expressing the relation of the profit/loss to costs is composed analytically so that it is not instructive enough to analyse the return to scale based on a comparison of results in two different periods. This function is influenced by fixed cost and its production utilization, change of profit due to an extensive increase of output and variable cost's size and efficiency. Each stage of the revenue function has specified relation of the above mentioned cost items. According to their relation the economy in each stage of the revenue function is derived. It is possible to use these analyses to optimize output regarding the profit/loss as well as to assess the economy related to any change of the profit volume. Supported by the Ministry of Education, Youth and Sports of the Czech Republic (Project No. MSM 6007665806).