1. Relation of A and T curves *3* As the level of production increases in the short-run, the Average Variable Cost (AVC) curve (increases continuously/first decreases and then increases/decreases continuously) and the Average Fixed Cost (AFC) curve (increases continuously/first decreases and then increases/decreases continuously). O Increases continuously; decreases continuously. O First decreases and then increases; decreases continuously. First decreases and then increases; increases continuously. Decreases continuously; decreases continuously. O Increases continuously; first decreases and then increases. Save & Continue Continue without saving

1. Relation of A and T curves 3 As the level of production increases in the short-run, the Average Variable Cost (AVC) curve (increases continuously/first decreases and then increases/decreases continuously) and the Average Fixed Cost (AFC) curve (increases continuously/first decreases and then increases/decreases continuously). O Increases continuously; decreases continuously. O First decreases and then increases; decreases continuously. First decreases and then increases; increases continuously. Decreases continuously; decreases continuously. O Increases continuously; first decreases and then increases. Save & Continue Continue without saving

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The N.M. Corporation has exactly the same costs of production as last year except for fixed costs, which are $50,000 this year compared to $30,000 last year. Which of the following statements is false? O The total cost curve will be the same this year as last year. O The fixed cost curve will have the same slope this year as last year. O The variable cost curve will be the same this year as last year. O The marginal cost curve will be the same this year as last year.
Which of the following production functions exhibits increasing returns to scale? OA. AY=k1/2 1/2 O B. Y=K°L1-a O.Y=k1/3L 2/3 O D. Y=K1/2L 3/4 O E. Y=K1/3L 1/3
2. A firm has a production function given by the following table: Units of Labor 1 2 3 4 5 K=1 3 8 12 15 17 K=2 10 15 19 22 24 K=3 16 21 25 28 30 K=4 20 25 28 30 31 (1) Suppose that K is fixed at 2. Does this production function exhibit diminishing marginal returns? (ii) Does this production function exhibit constant returns to scale for all values of K and L?
4. Suppose you're a manager at a plant producing Aston Martin cars. You estimate that your production function is q = 0.1L2K³ where q is the quantity produced, L is labor, and K is capital. Suppose in the short-run, capital is fixed at 3 units. a. What is the short-run production function? b. In the long-run, does this production function have constant returns to scale, increasing returns to scale, or decreasing returns to scale? . You take a part time job at a grocery store. Using your knowledge of economics, you estimate that the demand for milk is inelastic. If you decide you want to increase your total revenue, should you lower the price of milk or increase the price of milk?
Give typing answer with explanation and conclusion
6. If a firm's ATC is falling in the long run, then a. it is subject to economies of scale over that range of output b. it is subject to diseconomies of scale over that range of output c. it is subject to constant return to scale over that range of output d. it has reached the minimum efficient scale of production e. both it is subject to constant return to scale over that range of output and it has reached the minimum efficient scale of production are true
4. The shape of a firm's long-run average cost curve depends o how costs vary with scale of operation. Draw a long-run average cost curve for a firm that exhibits economies of scale, constant returns to scale, and diseconomies of scale. Identify each of these sections of the cost curve and explain why each section exemplifies its specific type of return to scale.
What are diseconomies of scale? Diseconomies of scale is A. when the marginal product of labor is decreasing with output. B. when the marginal cost of production is increasingwith output. C. when a firm's long-run average costs decrease with output. D. when a firm's long-run average costs increase with output.
An example of constant returns to scale is when capital and labor inputs: A. both increase 5 percent and output increases 10 percent. OB. do not change and output decreases 5 percent. OC. both increase 10 percent and output increases 5 percent. D. both increase 10 percent and output increases 10 percent.
2. Short Run Production Function and Total Product curve. You will need words, a chart and a graph here. Next, be sure to do the same for average and marginal product of labor. Explain what is going on in your graphs.
Using diagram, explain returns to scale and their influence on a firm's long-run average cost (LRAC). CS Scanned with CamScanner
A firm doubles its inputs and discovers that its output has trebled. The prices of the inputs remain constant. This is an example of: Select one or more: Constant returns to scale. O a. O b. Increasing returns to scale. O C. Dis-economies of scale. O d. Economies of scale.