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Chapter 22: Q.23 (page 509)

Consider Figure 22-6. Suppose that the current scale of output for a typical firm facing this LAC curve, which applies to all firms in this industry, is between points A and B, at about 500 units per period. If a new firm entering the industry desires to produce at the minimum efficient scale, would it wish to produce 10 units per period, 500 units per period, or 1,000 units per period? Explain.

Short Answer

Expert verified

It would produce10units per period

Step by step solution

01

Introduction

Assume that the ongoing size of results for a run of the mill firm confronting this LAC is at around 500 for every unit of the period. If another firm enters the business, the base effective point for the firm to create would be at10units per period.

02

Explanation

Given the LAC assuming another firm goes into the business it would deliver at the base proficient point. At which the base productive point the typical expense will be low. At the point when the firm attempts to extend its result the typical expense will be low and thereby the organizations partake in the advantages of economies of scale. Economies of scale are what is happening in which expanding of plant size prompts below cost bend. The diseconomies of scale are what is going on in which long-run normal expense ascends because of the expansion in yield. hence It would produce 10units per period.

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Most popular questions from this chapter

Take a look at the Figure. Suppose that the firm decided to consider employing the 12th unit of labor, which it has determined would result in a decrease in total product to 370 units of output. If it were to do this, what would be the resulting average product of labour and the marginal product of labour?

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If short-run average variable costs and marginal costs decline at every feasible quantity of output, what (if anything) happens to the positions of the AVC, AFC, ATC, and MC curves? Explain.

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