(Refer to figure above) Which of the following changes in the depicted firm’s ou
ID: 1174064 • Letter: #
Question
(Refer to figure above) Which of the following changes in the depicted firm’s output illustrates economies of scale?
Increasing output from Q4 to Q5
Producing at Q2
Decreasing output from Q3 to Q2
Increasing output from Q1 to Q2
(Refer to figure above) If the demand curve shown is for total market demand what does Point U on the graph indicate?
$2.40 is the average total cost for producing the product
Demand is lower than at Point T
If providers of this product create 20 units they will only sell them if they can get $2.40 apiece for them.
At a price of $2.40 the market will consume 20 units of the product
Explanation / Answer
(Question 1) Option (2)
Since cleaning can be done at a lower cost, average total cost will fall, enabling firm to achieve economies of scale.
(Question 2) Option (4)
When output increases from Q1 to Q2, average total cost is falling, signifying that with increase in output, ATC is decreasing, so the firm enjoys economies of scale in this range.
(Question 3) Required graph is missing.
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