8. Engineers sometimes rely on the "0.6 rule," which states that the increase in cost is given by the increase in capacity raised to the 0.6 power; that is, C, = C,(X,/X,)06 where C, and C, are the costs of two pieces of equipment, and X, and X, are their respective capacities. a. Does the 0.6 rule suggest economies of scale? b. Some experts have stated that in the chemical and metal industries, the 0.6 rule can be applied to entire plants rather than individual pieces of equipment. If so, will the long-run average cost curve in these industries tend to be negatively sloped? Can vou think of a way to test whether this rule is correct? C.

8. Engineers sometimes rely on the "0.6 rule," which states that the increase in cost is given by the increase in capacity raised to the 0.6 power; that is, C, = C,(X,/X,)06 where C, and C, are the costs of two pieces of equipment, and X, and X, are their respective capacities. a. Does the 0.6 rule suggest economies of scale? b. Some experts have stated that in the chemical and metal industries, the 0.6 rule can be applied to entire plants rather than individual pieces of equipment. If so, will the long-run average cost curve in these industries tend to be negatively sloped? Can vou think of a way to test whether this rule is correct? C.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section7.A: Appendix: A Closer Look At Production And Cost

Problem 1AQ

See similar textbooks

Similar questions

Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
What is the difference between a fixed input and a variable input?
What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and diseconomies of scale?
Are fixed costs also sunk costs? Explain.
Suppose the cost of machines increases to 55, while the cost of labor stays at 40. How would that affect the total cost of the three methods? Which method should the film choose now?
Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?
What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method Choices are: Method 1: 50 units of labor, 10 units of capital Method 2: 20 units of labor, 40 units of capital Method 3: 10 units of labor, 70 units of capital If hiring labor for the winter costs $100/unit and a unit of capital costs 400, what is the best production method? What method should the company use if the cost of labor rises to $20/unit?
In choosing a production technology, how will firms react if one input becomes relatively more expensive?
What is die difference between accounting and economic profit?
What are explicit and implicit costs?
Would you consider an interest payment on a loan to a film an explicit or implicit cost?