Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Q1) If the firm's average cost curves are U-shaped, why does its average variable cost curve achieve its minimum at a lower level of output

Q1) If the firm's average cost curves are U-shaped, why does its average variable cost curve achieve its minimum at a lower level of output than the average total cost curve?

Q2) Distinguish between economies of scale and economies of scope. Why can one be present without the other?

Q3) A chair manufacturer hires its assembly-line labor for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labor or machinery in any combination. If the firm is currently using 3 hours of labor for each hour of machine time, is it minimizing its costs of production? If so, why? If not, how can it improve the situation? Graphically illustrate the isoquant and the two isocost lines for the current combination of labor and capital and for the optimal combination of labor and capital.

Q4) If a firm enjoys economies of scale up to a certain output level, and cost then increases proportionately with output, what can you say about the shape of the long run average cost curve?

Q5) What are the average fixed cost, average variable cost and average cost of a firm? How are they related?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Water Pollution Economics Aspects And Research Needs

Authors: Allen V Kneese

1st Edition

1317387554, 9781317387558

More Books

Students also viewed these Economics questions

Question

1. What do I want to achieve?

Answered: 1 week ago

Question

3. What is my goal?

Answered: 1 week ago