Increasing demand from China has made New Zealand the world's biggest exporter of dairy products . Its exports of milk to China increased by 45 % in 2013. More than 300 000 hectares land in New Zealand have been transferred to dairy use from other forms of farming and forestry use since 2000. The increase in milk production has caused the average cost of its production to fall and changes in production methods have affected the price elasticity of supply of milk . Discuss whether the average cost of production always decreases when a firm increases the total output that it produces(Define economies of scale and diseconomies of scale Use of graph to explain ( if applicable ) Explain the various economies of scale e.g. purchasing economies of scale [ up to 5 ] Explain the various diseconomies of scale [ up to Brief conclusion

Increasing demand from China has made New Zealand the world's biggest exporter of dairy products . Its exports of milk to China increased by 45 % in 2013. More than 300 000 hectares land in New Zealand have been transferred to dairy use from other forms of farming and forestry use since 2000. The increase in milk production has caused the average cost of its production to fall and changes in production methods have affected the price elasticity of supply of milk . Discuss whether the average cost of production always decreases when a firm increases the total output that it produces(Define economies of scale and diseconomies of scale Use of graph to explain ( if applicable ) Explain the various economies of scale e.g. purchasing economies of scale [ up to 5 ] Explain the various diseconomies of scale [ up to Brief conclusion

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.11P

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