Question

Part 1: How does specialization lead to economies of scale?

Part 2: Distinguish diminishing returns from diseconomies of scale. Why do some firms experience diseconomies of scale?

Part 3: Explain why this statement is true or false: "If the labor cost per table is $20 and the material cost per table is $30, the short run average cost per table is $50."

Part 4: Suppose the indivisble inputs used in the production of shirts have a cost per day of $400. To produce one shirt per day, the firm must spend a total of $5 on other inputs (labor, materials) and the firm incurs the same additional cost for each additional shirt. Compute the average cost for 40 shirts, 100 shirts, 200 shirts, and 400 shirts. What will the average total cost curve look like?

Part 5: Why does average cost decrease as the quantity produced increases?

Part 6: Suppose electricity Firm ABC generates 30 billion kilowatthours of electricity, which is about three times the output of electricity Firm XYZ. Which firm will have a higher cost per kilowatthour? Why?

Part 7: How do explicit costs differ from implicit costs?

Part 8: What happens to total fixed costs as output rises?

Part 9: Complete the statement with "average" or "marginal": The short-run marginal-cost curve intersects the short-run average-cost curve at the minimum point of the ______ cost curve.

Part 10: Furniture and automobile manufacturing are good examples of labor specialization. What would you expect to pay for a car built by a single individual? Why?