a) Explain what is meant by the terms marginal cost and decreased cost inproduction theory, and give some examples that can illustrate the concepts. Explain ifThese terms are relevant to a for-profit company that sells onefinished product in a market with a fixed market price.b) The production in a company can be described by the product functionyfe 0 , there y isnumber of units produced of the item, and v is the number of units of the input factor. The companycan buy the input factor at a fixed price per unit, and has no fixed costs. Anta atproduction is characterized by declining scale yields. Explain what it means and whatwhich in such a case can be said of the company's marginal costs. Use charts toillustrate the scale return and the marginal cost in this case. Be carefulthe axis designations.

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a) Explain what is meant by the terms marginal cost and decreased cost in production theory, and give some examples that can illustrate the concepts. Explain if These terms are relevant to a for-profit company that sells one finished product in a market with a fixed market price.

a) Explain what is meant by the terms marginal cost and decreased cost in production theory, and give some examples that can illustrate the concepts. Explain if These terms are relevant to a for-profit company that sells one finished product in a market with a fixed market price.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.9P

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Question

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a) Explain what is meant by the terms marginal cost and decreased cost in
production theory, and give some examples that can illustrate the concepts. Explain if
These terms are relevant to a for-profit company that sells one
finished product in a market with a fixed market price.
b) The production in a company can be described by the product function
yfe 0 , there y is
number of units produced of the item, and v is the number of units of the input factor. The company
can buy the input factor at a fixed price per unit, and has no fixed costs. Anta at
production is characterized by declining scale yields. Explain what it means and what
which in such a case can be said of the company's marginal costs. Use charts to
illustrate the scale return and the marginal cost in this case. Be careful
the axis designations.

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