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A firm's production function is described by the isoquant map below. The wage rate is $4 and the rental rate of capital is $8. a)
A firm's production function is described by the isoquant map below. The wage rate is $4 and the rental rate of capital is $8.
a) Draw the firm's LR total cost curve. Label the points that correspond to points A, B and C in the figure and the coordinates of each point. (2 Marks)
b) Draw the firm's LR average cost curve. Label the points that correspond to points A, B and C in the figure and the coordinates of each point. (1 Mark)
c) What can you say about the existence of economies or diseconomies of scale in this industry? EXPLAIN. (2 Marks)
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