Homework Help is Here – Start Your Trial Now!
Business
Economics
Suppose that we have a technology with decreasing returns to scale and two firms that can use this technology. Is it more efficient that one firm use up all factors of production in the economy (capital, labor etc.) or are we better off dividing inputs equally among the two firms? What if there are increasing returns to scale? Constant returns to scale? Try to provide a general answer that does not depend on specific assumptions about the production function.

Suppose that we have a technology with decreasing returns to scale and two firms that can use this technology. Is it more efficient that one firm use up all factors of production in the economy (capital, labor etc.) or are we better off dividing inputs equally among the two firms? What if there are increasing returns to scale? Constant returns to scale? Try to provide a general answer that does not depend on specific assumptions about the production function.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

See attached image. If there is any work to show, show all work please. 

Suppose that we have a technology with decreasing returns to scale and two firms that can use this technology. Is it more efficient that one firm use up all factors of production in the economy (capital, labor etc.) or are we better off dividing inputs equally among the two firms? What if there are increasing returns to scale? Constant returns to scale? Try to provide a general answer that does not depend on specific assumptions about the production function.
Transcribed Image Text:Suppose that we have a technology with decreasing returns to scale and two firms that can use this technology. Is it more efficient that one firm use up all factors of production in the economy (capital, labor etc.) or are we better off dividing inputs equally among the two firms? What if there are increasing returns to scale? Constant returns to scale? Try to provide a general answer that does not depend on specific assumptions about the production function.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS