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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Need help answer point B. Cloud Service Providers
Transcribed Image Text: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
e. buying a museum pass when traveling to another city
LI
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