This study builds on recent research giving the notion of capacity utilization clearer economic foundations. In this research optimal output Y* is defined as the minimum point on the firm's short-run average total cost curve, and capacity utilization is then computed as CU=Y/Y*, where Y is actual output. Here I extend these concepts to include adjustment costs due to changes in the stock of capital, and nonstatic expectations of future output demand and input prices. The more general notion of CU is shown to depend on the shadow values of the firm's quasifixed inputs, and is decomposed to isolate the effects of anticipatory expectations. An empirical comparison is then made between traditional indices and alternative economic CU measures, using annual U.S. manufacturing data 1954-80. The calculated indices exhibit plausible patterns, which can be interpreted as the effects of nonstatic expectations and adjustment costs.

Increasing size of establishments and resulting concentration in U.S. industries may stem from various types of cost economies. In particular, scale economies arising from technological factors embodied in plant and equipment may be a driving force for such market structure changes. In this case, typical market power measures like Lerner indices can be misleading: if scale (cost) economies prevail, cost efficiencies rather than market deficiencies may actually underlie the observed patterns. In this study, I provide measures of scale economies and market power for the U.S. meat packing industry, whose increased consolidation and concentration have raised great concern in policy circles. The results suggest that this trend has been motivated by cost economies, but that little excess profitability exists, and on the margin the potential for taking further advantage of such economies has become minimal.