Principles of Microeconomics, California Edition
2nd Edition
ISBN: 9780393622102
Author: Dirk Mateer, Lee Coppock
Publisher: NORTON
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Chapter 8, Problem 4SP
To determine
Identify the type of economy scale that the firm experiences when considering a plant size change.
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Production function of a company is given by f(x;y)= root of x + root of y where x is labor and y is capital. Cost of labor is 2 currency units, while the cost of capital is 1 currency unit. What are the minimal cost to produce 10 units of the product? What is the change in the costs, if the production volume would increase by 50 %?
Suppose that Jump A Lot Inc. can produce 12 trampolines a day for a total cost of $1,840. If technology and input prices remain the
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A computer company produces hardware and software using the same plant and labor. The total cost of producing computer processing units H and software programs S is given by TC = aH + bS - cHS where a, b, and c are positive. Is this total cost function consistent with the presence of economies or diseconomies of scale? With economies or diseconomies of scope?
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Principles of Microeconomics, California Edition
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- Consider the following production function: Y = F(K, L) A(2K + 3L) Does this production function exhibit constant returns to scale? =arrow_forwardYou are given the following long-run cost function: TC = 150Q - 20Q2 + 1.8Q3 What level of Q will economies of scale ends and diseconomies of scale begin?arrow_forwardA firm's production function is given by y(K, L) = 2√(KL) or 2(KL).5 (2 times the square root of the product of K and L), where K is the number of machines used and L is the number of labor hours.A) Does this production process exhibit increasing, constant or decreasing returns to scale? (Hint: You MUST compare y(2K, 2L) to 2*y(K, L)... do NOT compare any other proportional increase!).B) Holding the number of machines constant at 4, is the marginal product of labor increasing, constant or decreasing as more labor is used? (Hint: You MUST construct a table of L, TP, and MP for 0 through 4 workers).Insert work for both A and B.arrow_forward
- The cost function of a firm is given as C1 = 400 + 20Q + 4Q using this cost function what is the efficient scale of the firm?.arrow_forwardCan you help me please Thank you for your time :)arrow_forwardIf a production function exhibits decreasing returns to scale, average cost will decrease as output expands. True Falsearrow_forward
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