1. Diseconomies of scale exist when: (Consider that more than one answer is correct.) there is specialization among workers coordination problems arise that are inherent in any large organization long-run average total cost falls as the quantity of output increases long-run average total cost rises as the quantity of output increases In the production process of Scott's coffee shop when the number of workers goes from 1 to 2, coffee production increases from 5 to 9 cups of coffee, so the marginal product of the second worker is 4 cups of coffee. And when the number of workers goes from 2 to 3, coffee production increases from 9 to 12, so the marginal product of the third worker is 3 cups of coffee. Please answer the following questions: a. What is marginal product? b. What happens to the marginal product with the increase in the number of workers? c. Why is this happening and how is this property called? Answer: U

1. Diseconomies of scale exist when: (Consider that more than one answer is correct.) there is specialization among workers coordination problems arise that are inherent in any large organization long-run average total cost falls as the quantity of output increases long-run average total cost rises as the quantity of output increases In the production process of Scott's coffee shop when the number of workers goes from 1 to 2, coffee production increases from 5 to 9 cups of coffee, so the marginal product of the second worker is 4 cups of coffee. And when the number of workers goes from 2 to 3, coffee production increases from 9 to 12, so the marginal product of the third worker is 3 cups of coffee. Please answer the following questions: a. What is marginal product? b. What happens to the marginal product with the increase in the number of workers? c. Why is this happening and how is this property called? Answer: U

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Number of Factories Q = 100 1 74°F Clear 2 3 440 620 800 Q = 200 280 380 480 Average Total Cost (Dollars per bike) Q = 300 Q = 400 240 320 240 320 240 240 Q = 500 480 380 280 Q = 600 800 620 440 Suppose Ike's Bikes is currently producing 100 bikes per month in its only factory. Its short-run average total cost is $440 per bike. Suppose Ike's Bikes is expecting to produce 100 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using one factory On the following graph, plot the three SRATC curves for Ike's Bikes from the…
Quantity 1 2 3 4 5 6 7 Firm 4 Firm 3 Long-Run Total Cost (Dollars) Firm 1 Firm 1 180 350 510 660 800 930 1,050 Firm 2 120 250 390 540 700 870 1,050 Refer to Table above. Which firm has economies of scale and then diseconomies of scale over the entire range of output? Firm 2 Firm 3 150 300 450 600 750 900 1,050 Firm 4 210 340 490 660 850 1,060 1,290
Question 3 Discuss the relationship between Long-Run Average Cost and Short-Run Average Cost for a firm. Show this diagrammatically. What are the strategic implications of a Long-Run Average Cost curve showing existence of economies of scale?
Q.2. (a) Define economies of scale and explain why they might arise. Define diseconomies of scale and explain why they might arise. Also draw the long run average total cost curve to explain the economies and diseconomies of scale. (b) Show the relationship between Marginal cost and Average total cost curve for a typical firm.
Suppose Nittany Bakery rents a building for $120 per day, and they can hire workers for $75 per day. The short run labor and output (quantity of scones) information is listed below. Fill in the columns for total cost and marginal cost. (Note: You may need to make columns for fixed cost (FC) and variable cost (VC) on a piece of scrap paper, which will make it easier to find total cost (TC).) Do not enter any dollar signs, and if necessary, round to two decimal places. Short Run Labor, Output, and Costs Labor (L) Output (Q) Total Cost (TC) Marginal Cost (MC) 00 -- 14 212 3 24 440 5 60 675 7 84
Distinguish between economies of scale and diseconomies of scale. Give examples of why a firm may experience economies of scale.