2.7 The concept of economies of scale refers to lower per- unit production costs at higher levels of output. The easi- est way to understand this is to look at whether long-run average cost decreases with output (economies of scale) or whether long-run average cost increases with output (diseconomies of scale). If average cost is constant as out- put rises, there are constant returns to scale. But the con- cept of falling unit costs is all around us. Explain how the concept of economies of scale helps shed light on each of the following: a. building construction b. cloud services providers c. e-invoice versus printed invoice d. a retired couple downsizing from a 4,000 sq. ft. house to a 2,000 sq. ft. apartment LI

2.7 The concept of economies of scale refers to lower per- unit production costs at higher levels of output. The easi- est way to understand this is to look at whether long-run average cost decreases with output (economies of scale) or whether long-run average cost increases with output (diseconomies of scale). If average cost is constant as out- put rises, there are constant returns to scale. But the con- cept of falling unit costs is all around us. Explain how the concept of economies of scale helps shed light on each of the following: a. building construction b. cloud services providers c. e-invoice versus printed invoice d. a retired couple downsizing from a 4,000 sq. ft. house to a 2,000 sq. ft. apartment LI

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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