1. Traditional cost theory frequently represents, in graphical form, the long run average cost function as an envelope for a large set of short run average cost functions.
2. (a)Illustrate and explain this phenomenon in the classic case which includes both economies of scale and diseconomies of scale.
3. (10 marks)
4. (b)Illustrate and explain this phenomenon in the special case of constant returns to scale.
5. (5 marks)
6. (c)Illustrate and explain what is meant by the term minimum efficient scale (MES)?