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Measurement of Capacity Utilization for Revenue-Maximizing Firms


A dual measure of capacity utilization is developed for multiproduct, revenue-maximizing firms. Under the assumption of revenue maximization, the sensitivity of CU to a change in an individual product price is shown to be directly related to the product-specific scale elasticity. The results are given a simple graphical interpretation.

Source: Segerson, K. and D. Squires. 1995. “Measurement of capacity utilization for revenue-maximizing firms.” Bulletin of Economic Research, 47(1): 77-84.

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