Question 1

Economies of scale and economies of scope are related and occur for the same reason.

Accepted Answer

Economies of scale refer to cost advantages that enterprises obtain due to size, output, or scale of operation, with costs per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Economies of scope, however, refer to cost advantages that a business obtains through the variety of products it offers, stemming from the ability to share or utilize the same operations, knowledge, or processes to produce different types of goods or services, rather than just producing more of a single product. While both can lead to cost savings, they occur for different reasons related to the scale and variety of production, respectively.

Question 2

Consider the weight of the people in a theater.Suppose the first person you notice weighs 160 pounds,the second and third weigh 132 and 108 pounds,respectively.
(A)Graph the average and marginal weight of the three people in the theater,placing weight on the vertical axis and quantity of people on the horizontal axis in the same order that you notice them.
(B)What do you notice about the relationship between marginal and average weight?
(C)Suppose the fourth person coming into the theater weighs 170 pounds.What happens to the average weight?

Accepted Answer

The answer of Consider the weight of the people in...

Question 3

Are there economies of scale for a waiter serving customers in a restaurant? What economies of scale are realized if party sizes increase? Is there a maximum party size beyond which scale diseconomies are experienced?

Accepted Answer

The answer of Are there economies of scale for a...

Question 4

A firm can experience economies of scope by reducing the variety of products it produces.

Accepted Answer

Economies of scope occur when a firm is able to produce multiple products at a lower cost than it would be to produce each product separately. Therefore, reducing the variety of products produced would likely result in a decrease in economies of scope.

Question 5

Draw typical average total cost,average variable cost,and marginal cost curves for a competitive firm with price at the shutdown point.Show that total revenue equals variable costs at this quantity.Also show the firm's losses at this quantity.

Accepted Answer

The answer of Draw typical average total cost,average variable cost,and...

Question 6

Fill in the table below about the cost structure of a firm.

Accepted Answer

The answer of Fill in the table below about the...

Question 7

Use the cost function information provided in the table below to answer the following questions. 
(A)Suppose this firm is a price-taker.If the price is $18 per unit,will this firm be earning economic profits? How much? What quantity will it produce?
(B)What is the breakeven price? What is the shutdown price?

Accepted Answer

The answer of Use the cost function information provided in...

Question 8

Plot the following data for quantity of production and long-run average cost for a firm.Are there economies of scale,diseconomies of scale,or constant returns to scale? Indicate these areas in your diagram.

Accepted Answer

The answer of Plot the following data for quantity of...

Question 9

Consider the relationship between the average test score of a class and one student's test score.Suppose there are 10 students with an average test score of 80.Suppose the marginal score is the test score of a new student,Kelly.
(A)If Kelly's score is 90,what will happen to the new average test score of the class?
(B)If Kelly's score is 70,what will happen to the new average test score of the class?
(C)What do your answers to parts (A)and (B)illustrate about the relationship between marginal and average curves in general?

Accepted Answer

The answer of Consider the relationship between the average test...

Question 10

Explain the difference between economies of scale and economies of scope.

Accepted Answer

The answer of Explain the difference between economies of scale...

Question 11

Fill in the table below for a competitive firm that can sell its product for $7 a unit.  
(A)What quantity will this firm produce? Why?
(B)At that quantity level,what profits or losses will this firm make?
(C)Is this market in long-run equilibrium? Why or why not?
(D)In the short run,at what price would this firm break even? At what price would the firm shut down? Explain briefly.

Accepted Answer

The answer of Fill in the table below for a...

Question 12

Suppose the average total cost curves for a firm for three different amounts of capital are as shown in the table below:  (A)Plot the three average total cost curves in the same diagram.
(B)Determine the long-run average total cost curve and show it in the same diagram as in part (A).

Accepted Answer

The answer of Suppose the average total cost curves for...

Quiz 8: Costs and the Changes at Firms Over Time