ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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1. Economies of scale
Vision Source is a cable television provider. In the long run, Vision Source can provide cable television for 20,000 homes each month at a total cost of
$700,000, cable television for 30,000 homes at a total cost of $750,000, or cable television for 40,000 homes at a total cost of $800,000.
Use the purple points (diamond symbol) on this graph to plot points of the long-run average cost curve at outputs of 20,000, 30,000, and 40,000
homes.
50
Average cost
40
30
10
10
20
30
40
50
HOMES SERVED (Thousands)
AVERAGE COST (Dollars per home per month)
20
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Transcribed Image Text:1. Economies of scale Vision Source is a cable television provider. In the long run, Vision Source can provide cable television for 20,000 homes each month at a total cost of $700,000, cable television for 30,000 homes at a total cost of $750,000, or cable television for 40,000 homes at a total cost of $800,000. Use the purple points (diamond symbol) on this graph to plot points of the long-run average cost curve at outputs of 20,000, 30,000, and 40,000 homes. 50 Average cost 40 30 10 10 20 30 40 50 HOMES SERVED (Thousands) AVERAGE COST (Dollars per home per month) 20
Suppose that Vision Source provides cable television for all 40,000 homes that purchase cable in the metropolitan area.
For the first 40,000 homes, Vision Source faces:
Economies of scope
Increasing returns to scale
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Transcribed Image Text:Suppose that Vision Source provides cable television for all 40,000 homes that purchase cable in the metropolitan area. For the first 40,000 homes, Vision Source faces: Economies of scope Increasing returns to scale
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