Costant return toscale: Situation inwhich output doubles when E CONo MIESOF SCACE chen firm can double its output at less than twice tre me 11. Returns to Scale and Economies of Scale 17 all impurs ane Can a production function simultaneously exhibi: constant returns to scale and economies of scale? Let Px = 10, Py = 1O. lovored. > Draw three isocost lines for total cost of $60, $90, and $120. Draw isoquants and a LR expansion path to answer. K FC しR 7. MC 3 TC 90 120 TC 60 9 10 12 3. Px=10 Py=10 イレ。 TC-90 TC= 60 190/10 = 12 TC/PX=b0/10:6 TC Px Q + Py-Q> 120/10-12

Costant return toscale: Situation inwhich output doubles when E CONo MIESOF SCACE chen firm can double its output at less than twice tre me 11. Returns to Scale and Economies of Scale 17 all impurs ane Can a production function simultaneously exhibi: constant returns to scale and economies of scale? Let Px = 10, Py = 1O. lovored. > Draw three isocost lines for total cost of $60, $90, and $120. Draw isoquants and a LR expansion path to answer. K FC しR 7. MC 3 TC 90 120 TC 60 9 10 12 3. Px=10 Py=10 イレ。 TC-90 TC= 60 190/10 = 12 TC/PX=b0/10:6 TC Px Q + Py-Q> 120/10-12

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 42P: A small company that shovels sidewalks and driveways has 100 homes signed up for its services this...

See similar textbooks

Similar questions

In choosing a production technology, how will firms react if one input becomes relatively more expensive?
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?
What is the difference between a fixed input and a variable input?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
What shape of a long-run average cost curve illustrates economies of scale, constant returns to scale, and diseconomies of scale?
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?
Suppose there are two inputs for production, labor and capital. The firm’s production process isdefined by the following production functiony=f(L,K).Howdoweinterpretthefirm’smarginalrateof technical substitution? a)How many units of capital the firm would have to give up in order to attain one more unit oflabor, such that the firm maintains the same cost level b)How many units of capital the firm would have to give up in order to attain one more unit oflabor, such that the firm produces one more unit of output c)How many units of capital the firm would have to give up in order to attain one more unit oflabor, such that the firm maintains the same level of production d)a) and b) are correct e)a) and c) are correct
a. Complete the table below Quantity TC TVC AFC ATC MC AVC 1 200 2 100 3 20 4 240 5 24 6 660 160 b. Using the table below indicate if the firm has (i) diseconomies of scale (ii)economies of scale or (iii) constant returns to scale over the entire range ofoutput. Explain your answer . Quantity (units of output) 1 2 3 4 5 6 7 firm A 60 70 80 90 100 110 120 FIRM B 11 24 39 56 75 96 119 FIRM C 21 34 49 66 85 106 129 c. Evaluate the view that the main goal of firms will always be cost minimization.
Provethatthetechnologyf(L,K)=L2+K2 exhibitsincreasingreturnstoscale. What is the formula for the average product of capital? For the total cost curve TC(q) = q3, prove the technology exhibits decreasing returns to scale
WW is a small automobile manufacturer. The table below shows WW’s long-run average total cost: Quantity of cars LRATC of car 1 $60,000 2 40,000 3 30,000 4 24,000 5 24,000 6 24,000 7 28,000 8 36,000 a. For which levels of output does WW experience economies of scale? ___________ b. For which levels of output does WW experience diseconomies of scale? ___________ c. For which levels of output does WW experience constant returns to scale? ___________
Returns to scale in production: Do the following production functions exhibitincreasing, constant, or decreasing returns to scale in K and L? (Assume Ais some fxed positive number.)(a) Y = K1/2L1/2(b) Y = K2/3L2/3(c) Y = K1/3L1/2(d) Y = K + L(e) Y = K + K1/3L1/3 (f ) Y = K 1/3L2/3 + A (g) Y = K 1/3L2/3 − A
WW is a small automobile manufacturer. The table below shows WW’s long-run average total cost: Quantity of cars LRATC of car 1 $60,000 2 40,000 3 30,000 4 24,000 5 24,000 6 24,000 7 28,000 8 36,000 which levels of output does WW experience economies of scale? ___________ which levels of output does WW experience diseconomies of scale? ___________ which levels of output does WW experience constant returns to scale? ___________