Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 3P
To determine
The comparison between economies of scale and economies of scope and the reason for few firms producing multiple products while the others produce one only.
Concept Introduction:
Firm’s production is based on production costs like average cost and marginal cost. Revenue generated from sales (total profit − cost).
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Microeconomics - Production FunctionA firm produces shoes using labor (L) and machinery (K) as factors of production. Its production function is Q = K1/3 * L2/3. Answer:(a) is the marginal product of labor (MPL) decreasing?b) is the average product of labor (APL) decreasing?c) what is the relationship between the average product (AP) and marginal product (MP) curves?d) what type of returns to scale does Q exhibit?
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- Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?arrow_forward3. (*4") At nine units of output (Q=9), Average Variable Cost is (AVC=) $15 and Average Fixed Cost is (AFC=) $10. At ten units of output (Q=10), Average Variable Cost is (AVc=) $16 and Average Fixed Cost is (AFC=) $9. The Marginal Cost of the tenth unit of output is (MC-): A. $10. B. $1. C. Not available with the information provided. D. $25. O E S-1.arrow_forwarda. What is true about output levels 350, 700, 1,050, 1,400, and 1,750?Choices below. (Economic capacity ,Maximum cost, Economies of Scale b. What is the right size of a plant to produce an output of 875? (Plant1,Plant 2, Palnt 3, Plant 4, Plant 5) c. Between what plant sizes does the firm experience economies of scale? (Between plant1 and 3 ,Between plant 3 and 4, Between plant 3 and 5)arrow_forward
- Question 1 Capital (K) Labor (L) Total Product (TP) Average Product (AP) Marginal Product (MP) 10 0 0 10 1 5 10 2 15 10 3 30 10 4 50 10 5 75 10 6 85 10 7 90 10 8 92 10 9 92 10 10 90 1.1 From the information in the table, calculate marginal and average product of each level of output. 1.2 At what point of output does diminishing marginal returns occur?arrow_forward6. Relationship between returns to scale, isoquants, production frontiers, and cost curves The following graph shows two isoquants that represent the firm's production technology. One of the isoquants shows all of the possible combinations of labor and capital that can produce 300 units of output (q = 300), but you must determine the other isoquant's quantity given the information that follows. CAPITAL 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 40 50 LABOR 60 70 80 ¹9, = 300 90 100 Suppose the firm's production process exhibits decreasing returns to scale. Based on the graph, the level of output represented by the second isoquant is q2 =arrow_forwardOnly typed answer 1. What is the marginal rate of technical substitution at each cost minimizing equilibrium point? 2.How many units of labor should the firm use to produce 1,200 units of output at least cost?arrow_forward
- Multiple choice questions - Microeconomics 35) What is the firm’s efficient scale? A. the quantity of output that minimizes average total cost B. the quantity of output that minimizes average variable cost C. the quantity of output that minimizes marginal cost D. the quantity of output that minimizes average fixed cost 34) Marginal cost increases as the quantity of output increases. What property does this reflect? A. diminishing total cost B. increasing marginal product C. increasing total cost D. diminishing marginal productarrow_forward6. Which of the following describes the difference between economies of scale and economies of scope? The difference is that economies of scale are characterized by a firm's short run average total cost curve. Economies of scope deal with a firm's ability to add inputs to production. economies of scale are characterized by a decreasing long‑run average total cost curve due to specialization of labor. Economies of scope deal with firm's ability to produce related products due to similar production processes. economies of scale are characterized by an increasing long‑run average total cost curve. Economies of scope deal with a decrease in a firm's short run total cost. economies of scale are characterized by a firm's ability to add products that are interdependent. Economies of scope are characterized by a decreasing long‑run average total cost curve.arrow_forwardQUESTION 15 Costs per unit The vertical difference between curves F and H measures O marginal cost average total cost O average fixed cost average variable cost E LL F G H Quantity of outputarrow_forward
- 36) 36) Vipsana's Gyros House sells gyros. The cost of ingredients (pita, meat, spices, etc.) to make a gyro is $2.00. Vipsana pays her employees $60 per day. She also incurs a fixed cost of $120 per day. Calculate Vipsana's average fixed cost per day when she produces 50 gyros using two workers? A) $2.00 B) $2.40 C) $4.40 D) $6.80 Page Ref: 369-370arrow_forward7. A firm can build a plant of three different sizes. The short-run average total cost curves of each size plant are as follows: Plant A Plant B Plant C Output Average Total Cost Output Average Total Cost Output Average Total Cost 1 20 20 30 20 50 5 18 40 20 50 20 10 15 60 10 400 3 20 20 80 20 600 8 25 40 100 50 800 20 What is the long-run average cost of producing 20 units of output? Why?arrow_forwardQuestion 4. (a) Explain the concept of economies of scale. Explain how an organisation such as Starbucks would realise economies of scale in its business operations (use examples to support your answer)(b) Wages are lower in the Middle East than in Australia. Explain how this fact will make Starbucks average cost and marginal cost curves different in its Middle East cafés compared to its Australian cafesarrow_forward
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