Knapp5 - WEEK 5 CH9, Q1 For each of the following, decide...

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WEEK 5 CH9, Q1 – For each of the following, decide whether you agree or disagree and explain your answer: a. Firms that exhibit constant returns to scale have U-shaped long-run average cost curves. This statement is incorrect because firms with constant returns to scale will have horizontal long-run average cost curves. b. A firm suffering losses in the short run will continue to operate as long as total revenue at least covers fixed cost. This statement is incorrect because a firm suffering losses in the short run should continue to operate as long as total revenue is greater than variable costs. CH9, Q4 – Which of the following industries do you think are likely to exhibit large economies of scale? Explain why in each case. a. Home building industry is likely to exhibit large economics of scale because home building is usually done by large corporations with decreasing long-run average costs. b. Electric power generation industry is likely to exhibit large economies of scale because a large power plant is needed such that long-run average costs decreases with output. c.
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This note was uploaded on 06/15/2010 for the course EC 142DLB taught by Professor Graceonodipe during the Spring '10 term at Park.

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Knapp5 - WEEK 5 CH9, Q1 For each of the following, decide...

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