Bundle: ECON MICRO, 5th + Aplia, 1 term Printed Access Card
5th Edition
ISBN: 9781337192712
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 1.3P
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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(
Relationship Between Marginal Cost and Average Cost
) Assume that labor and
capital are the only inputs used by a firm. Capital is fixed at 5 units, which cost
$100 each per day. Workers can be hired for $200 each per day. Complete the
following table to show average variable cost (
AVC
), average total cost (
ATC
),
and marginal cost (
MC
).
Question 9
Which of the following relationship is correct?
When marginal cost (MC) starts to increase; average variable cost (AVC) starts to decrease
When marginal product (MP)starts to decrease, marginal cost (MC) starts to increase
When marginal product (MP) starts to decrease, marginal cost (MC) starts to decrease
O When marginal product (MP) starts to increase; marginal cost (MC) starts to increase
3.
(*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.
Chapter 14 Solutions
Bundle: ECON MICRO, 5th + Aplia, 1 term Printed Access Card
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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_forwardQuestion 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_forwardPlease do fast don't use ai to answerarrow_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_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_forward36) 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_forward
- 8. Questions and Problems 16 People often argue that large firms in an industry have cost advantages over small firms in the same industry. For example, they might assert that a big oil company must have a cost advantage over a small oil company. For this to be true, what condition must exist? O There are no economies of scale. There is no necessary condition for large firms to have a cost advantage over small firms. There are economies of scale, and the small firm is operating at an output level at which economies of scale exist. O There are economies of scale, and the large firm is operating at an output level at which economies of scale exist.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_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_forward
- Plot and Graph TP, AP, and MCarrow_forward22. Suppose an artist put on 5 concerts in Korea last month for an average total cost of $1 million each. It considered doing 6 concerts for an average total cost of $0.9 million but decided not to. What would have been the marginal cost of the 6th concert? $_ millionarrow_forward1. What is the formula to calculate profits? 2. Define Explicit and Implicit Costs. 3. Define Economic Profit and Accounting Profit. 4. Define Production Function, Marginal Product, and Diminishing Marginal Product. 5. Define Fixed Costs and Variable Costs. 5. Provide the formula/calculation for the following costs: Average Total Cost, Average Fixed Cost, Average Variable Cost, Marginal Cost. 6. Define Minimum Average Cost and Efficient Scale. 7. Define Economies of Scale, Diseconomies of Scale, Constant returns to scale.arrow_forward
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