12 The table shows the production function of Cathys Cakes. Output (cakes per day) Labour (workers per

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12 The table shows the production function of Cathy’s Cakes. Output (cakes per day) Labour (workers per day) Plant 1 Plant 2 Plant 3 Plant 4 1 20 40 55 65 2 40 60 75 85 3 65 75 90 100 4 65 85 100 110 Ovens (number) 12 34 Cathy pays a100 a day for each oven she rents and a50 a day for each kitchen worker she hires. a Find and graph the average total cost curve for each plant size. b Draw Cathy’s long-run average cost curve. c Over what output range does Cathy experience economies of scale? d Explain how Cathy uses her long-run average cost curve to decide how many ovens to rent.

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Economics

ISBN: 9781509540235

6th Edition

Authors: Michael Parkin, Melanie Powell, Kent Matthews

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