Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9.A, Problem 2P
To determine
External diseconomies of scale.
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Students have asked these similar questions
This is a graph of our firm’s costs. Label the lines on the graph using the following labels: average fixed cost (AFC), average variable cost (AVC), average total cost (ATC) and marginal cost (MC). Then label the shut down and breakeven points on the graph.
The accountants claim that we are at our profit maximizing point. You decide to investigate potential diseconomies of scale. What diseconomies of scale do you think you might find? How could these be addressed and hopefully decrease costs? (20 points)
N
f = 0.75,
=
10000,
S= 0.04, G = 100, B
T = 150,
rr = 0.1,
=
1000,
cr = 0.5
1. Calculate the long-run equilibrium. For this, you need to find the equilibrium values of Y,
W/P, C, S, r and I.
Company ZAP operates in car industry. When
ZAP operates at full capacity (10.000
cars/month), economies of scale is reached,
and cost/car is minimum. However, due to an
economic crisis, the sales of ZAP decreased
to 6.000 cars/month. Economic forecasts
show that the crises will continue for 2-3
years more.
a) As the manager of ZAP what would you
do to adjust scale? Why?
b) After 3 years if the demand for your cars
starts to increase how would you react?
Explain.
Chapter 9 Solutions
Principles of Economics (12th Edition)
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- A company produces and sells a consumer product and is able to control the demand for the product by varying the selling price. The approximate relationship between price and demand is p= 200-0.05D where p is the price per unit in dollars and D is the demand per month. The company is seeking to maximize its profit. The fixed cost is $15000 per month and the variable cost is $50 per unit. a. What is the number of units that should be produced and sold each month to maximize profit? b. What is the domain of profitable demand during a month? Show your spreadsheet.arrow_forwardQ4 (i) A business manager determines that t months after production begins on a new product, the number of units produced will be P thousand,where P(t) =6t2 + 5t (t + 1)2. What happens to production in the long run ? (ii) A ruptured pipe in a North Sea oil rig produces a circular oil slick that is y meters thick at a distance x meters from the rupture.Turbulence makes it difficult to directly measure the thickness of the slick at the source (where x = 0),but for x > 0,it is found that y =0.5(x2 + 3x) /x3 + x2 + 4x.Assuming the oil slick is continuously distributed,how thick would you expect it to be at the source?arrow_forwardIke's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost each month for various levels of production if it uses one, two, or three factories. (Note: Q equals the total quantity of bikes produced by all factories.) Average Total Cost (Dollars per bike) Number of Factories O = 100 Q = 200 Q = 300 Q = 400 Q = 500 O = 600 1 520 400 320 400 560 800 660 480 320 320 480 660 800 560 400 320 400 520 Suppose Ike's Bikes is currently producing 500 bikes per month in its only factory. Its short-run average total cost is $ per bike. Suppose Ike's Bikes is expecting to produce 500 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using On the following graph, plot the three short-run average total cost curves (SRATC) for Ike's Bikes from the previous…arrow_forward
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