Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 9, Problem 2.6P
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Whether to agree or disagree with the given statements.
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- Q2) Distinguish between economies of scale and economies of scope. Why can one be present without the other?arrow_forwardFor each statement below, explain whether it is TRUE or FALSE. In addition, defend your answer with an explanation. (a) True or False? "In the short run, the gap between average total costs and average variable costs should grow as a company produces higher levels of output." (b) True or False? "In the long run, a firm's average fixed costs should decline as the firm produces higher levels of output." (c) True or False? "Whenever marginal costs are below average total costs, the firm's average total costs will decline."arrow_forward“Only large firms tend to enjoy lower costs due to scale of production. Do you think large firms can compete better than smaller firms and small firms will always be at the losing end because of this?” By using concepts such as economies of scale, explain whether you agree with the statement using specific examples based on an industry of your choice.arrow_forward
- Ebba Kantzen says the following: "I am currently producing 10,000 pizzas per month at a total cost of $50,000. If I produce 10,001 pizzas, my total cost will rise to $50,011. Therefore, my marginal cost of producing pizzas must be increasing." ( 1.) Using the point drawing tool, indicate the point of marginal cost. Label this point "Marginal cost." 2.) Using the point drawing tool, indicate the point of average total cost. Label this point "Average total cost." Carefully follow the instructions above, and only draw the required objects. Costs(dollars per pizza) (5.95,0) MC Quantity (pizzas per month) points ATCarrow_forwardCosts # Refer to the graph above to answer this question. Which curve illustrates average variable cost? OA) 1. ty B) 2. C) 3. OD) 4. Quantity of outputarrow_forwardHow would each of the following affect average total cost, average variable cost, and marginal... Question: How would each of the following affect average total cost, average variable cost, and marginal cost? A. An increase in the cost of the lease of the firm's building. B. A reduction in the price of electricity. C. A reduction in wages. D. A change in the salary of the president of the company.arrow_forward
- explain short run and long run cost of production analysis with graphsarrow_forwardPlease explain why, check the picture: This is about average variable costarrow_forwardIke's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Average Total Cost (Dollars per bike) Number of Factories Q = 100 Q = 200 Q = 300 Q = 400 Q = 500 Q = 600 %3D 1 440 280 240 320 480 800 2 620 380 240 240 380 620 800 480 320 240 280 440 Suppose Ike's Bikes is currently producing 600 bikes per month in its only factory. Its short-run average total cost is s per bike. Suppose Ike's Bikes is expecting to produce 600 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using On the following graph, plot the three SRATC curves for Ike's Bikes from the previous table.…arrow_forward
- Which is the correct formula for the total cost of production?Note: TC is total Cost, AFC is average fixed cost, AVC is average variable cost, MC is marginal cost, TVC is total variable cost, TFC is total fixed cost, and Q is output. PLEASE EXPLAIN THE ANSWER A. TC = (AFC + AVC) (Q) B. TC = TVC + TFC C. TC = (MC)(Q) D. A and B are correct E. A, B and C are correctarrow_forwardA firm produces identical outputs at two different plants. If the marginal cost at the first plant exceeds the marginal cost at the second plant, how can the firm reduce costs while maintaining the same level of overall output? Explain.arrow_forwardWhich one of the following statements about a firm’s cost curves is true? A. The average variable cost curve only includes explicit costs. B. Increases in input prices for variable factors of production will shift the firm’s marginal cost curve up and also shift the firm’s total variable cost curve up. C. Fixed costs only include implicit costs. D. An increase in the price of a fixed factor of production will shift all of the firm’s cost curves up. E. A competitive firm’s short run supply curve is always identical at all points to its short run marginal cost curve.arrow_forward
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