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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

If a higher level of production allows workers to specialize in particular tasks, a firm will likely exhibit _______of scale and ______ average total cost.

a. economies, falling

b. economies, rising

c. diseconomies, falling

d. diseconomies, rising

To determine
Economies of scale.

Explanation

Option (a):

In a market, when a higher level of production allows workers to perform a particular task, then the firm will exhibit the economies of scale. This leads to decreases in the average total cost. Thus, option ‘a’ is correct.

Option (b):

When a firm allows the work in a specialized task, then the market will exhibit the economies of scale but it will increase the average total cost. Thus, option ‘b’ is incorrect...

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