ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 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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Students have asked these similar questions
(
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
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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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_forwardMicroeconomics - Production FunctionA firm produces shoes using labor (L) and machinery (K) as factors of production. Its production function is Q = K1/3 * L2/3. Answer:(a) is the marginal product of labor (MPL) decreasing?b) is the average product of labor (APL) decreasing?c) what is the relationship between the average product (AP) and marginal product (MP) curves?d) what type of returns to scale does Q exhibit?arrow_forward#3arrow_forward
- Question 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_forward6. Relationship between returns to scale, isoquants, production frontiers, and cost curves The following graph shows two isoquants that represent the firm's production technology. One of the isoquants shows all of the possible combinations of labor and capital that can produce 300 units of output (q = 300), but you must determine the other isoquant's quantity given the information that follows. CAPITAL 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 40 50 LABOR 60 70 80 ¹9, = 300 90 100 Suppose the firm's production process exhibits decreasing returns to scale. Based on the graph, the level of output represented by the second isoquant is q2 =arrow_forward
- 6. Which of the following describes the difference between economies of scale and economies of scope? The difference is that economies of scale are characterized by a firm's short run average total cost curve. Economies of scope deal with a firm's ability to add inputs to production. economies of scale are characterized by a decreasing long‑run average total cost curve due to specialization of labor. Economies of scope deal with firm's ability to produce related products due to similar production processes. economies of scale are characterized by an increasing long‑run average total cost curve. Economies of scope deal with a decrease in a firm's short run total cost. economies of scale are characterized by a firm's ability to add products that are interdependent. Economies of scope are characterized by a decreasing long‑run average total cost curve.arrow_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_forwardOnly typed solutionarrow_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
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