Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 7.A, Problem 3TY
To determine
Expansion path of the firm.
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Explain how a change in the price of one input factor changes a firm’s long-run expansion path?
Discuss in detail the law of diminishing returns and how it explains the shape of the short-run average cost curve. provide a graph if possible.
What does a firm’s LRAC curve show? How is it related to the firm’s short-run ATC curves?
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- What is the law of diminishing returns? Explain why it applies only in the short run.arrow_forwardConsider the statement: “Total output starts falling when diminishing returns occur”. Do you agree or disagree? Explain.arrow_forwardQ3. The law of diminishing returns applies only to businesses with very simply production. Your Answer and Graph:arrow_forward
- A firm produces identical outputs at two different plants. If the marginal cost at the first plant exceeds the marginal cost at the second plant, how can the firm reduce costs while maintaining the same level of overall output? Explain.arrow_forwardIf a firm has economies of scale, it must have increasing returns to scale. True or false? PLEASE EXPLAIN IN DETAIL .arrow_forward
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