A firm planning to produce two goods, X and Y, obtains the following spreadsheet showing a portion of the multi product expansion path when the firm employs two inputs, L and K:

a. If the firm faces input prices of $40 and $80, respectively, for L and K, construct the multi product cost function by computing the missing values for LTC(X, Y).b. If the firm plans to produce 4 units of X and 6 units of Y in the long run, will the multi product firm experience economies of scope? Explain.c. If the firm plans to produce 8 units of X and 12 units of Y in the long run, will the multi product firm experience economies of scope? Explain.d. For a firm that is already producing 4 units of X, the marginal cost of adding 6 units of Y to its production mix is $ _________, which is ?_________(greater than, less than, equal to) the cost incurred by a single-product firm producing 6 units of Y, which is $ ?_________. Thus, economies of scope ?_________(exist, do not exist) for the product combination of 4 units of X and 6 units of Y.e. For a firm that is already producing 12 units of Y, the marginal cost of adding 8 units of X to its production mix is $ ?_________, which is (greater than, less than, equal to) the cost incurred by a single-product firm producing 8 units of X, which is $ ?_________. Thus, economies of scope ?_________(exist, do not exist) for the product combination of 8 units of X and 12 units of Y.

Transcribed Image Text:

Multiproduct expansion path Multiproduct total cost K Y LTC(X, Y) 1 6 2 11 8. 1 10 25 12 1 12 4 2 32 8 12 4.