Another cartoon

The above cartoon is a pun upon the long-run average cost curve (LRAC) of a firm.

For the region of BMI below 18.5, the person is considered underweight. The "unhealthiness" level decreases as the BMI increases (which essentially means weight increasing, considering constant height). Thus it is better for the person to gain weight - i.e. increase in size / expand waistline. This corresponds to the region left of the MES of the LRAC of a firm. Similarly to the concept of the person becoming healthier if he gains weight, the firm likewise gets to enjoy internal economies of scale as it expands its scale of production, which result in the average costs of the firm decreasing with increasing output/scale of production.

The region of BMI 18.5 to 22.9 constitutes what is considered the "healthy range" for an average Asian. As can be seen from the cartoon, in this region, the "unhealthiness" value is at its lowest, and the "unhealthiness" level remains almost constant throughout. Thus people belonging to this range all possess the same health status (assuming no other defects or conditions etc. of course) - having a BMI of say 19, is not much different from having a BMI of 22. This corresponds to the flat portion about the minimum efficient scale(MES) of a saucer-shaped LRAC of a firm. Accordingly, for firms producing in this region, whether they produce more or less makes little or no difference to the average costs incurred.

For the region of BMI above 22.9, the person is considered overweight. When the BMI of the person balloons past this point, the "unhealthiness" level increases as the BMI increases. This corresponds to the region right of the MES of the LRAC of a firm. Analogous to the above idea of the person getting more unhealthy as he gains further weight, the firm will experience substantial internal diseconomies of scale that outweigh the internal economies of scale experienced, as it further expands its scale of production, which result in the average costs of the firm increasing with increasing output/scale of production.

Thus in fact from the interesting analogy made in this cartoon, we see that firms are actually very much like humans (living organisms) - there is an optimum size for them to take on (dependent on the industry, much like the optimum weight of a person depending upon his or her height), and being too small or too big brings about disadvantages.

Zhe Wei