Managerial Economics

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ANSWERS TO EVEN-NUMBERED PROBLEMS-c6 2. This statement confuses average quantities and marginal quantities. Though average total cost is always greater than average variable cost, marginal cost certainly can exceed average cost. For instance, when short-run production is pushed past the point of diminishing returns, marginal costs tend to turn steeply upward and exceed average cost. 4. a. The firms, by combining the provision of several related services, hope to benefit from economies of scope on both the supply side and the demand side. On the supply side, similar services may take advantage of the same inputs. For example, it may be easier to train a financial services officer to do a number of related transactions than to train separate officers for each type of transaction. Additionally, the information to process one type of transaction, such as a customer's credit history, may also be relevant for other transactions. On the demand side, one-stop shopping allows consumers to conserve on transaction costs. Rather than going to several different firms for each type of transaction, the customer can do everything in one stop. b. It is possible for national banks to operate more efficiently than regional banks or state banks, but this depends on both production and transaction
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