Why might a firm operating with one plant achieve

This preview shows page 6 - 10 out of 63 pages.

Why might a firm operating with one plant achieve MEPS and yet not be large enough to achieve MES? (Clue: are all economies of scale achieved at plant level?
. Why might a firm producing bricks have an MES which is only 0.2 per cent of total EU production and yet face little effective competition from other EU countries?
Chapter 5 Answer
What would the isoquant map look like if there were (a) continuously increasing returns to scale; (b) continuously decreasing returns to scale? Answer
What would happen to the TR curve if the market price rose to £10? Try drawing it.
Chapter 5 Copy Figures 5.18 and 5.19 (which are based on Table 5.8). Now assume that incomes have risen and that as a result two more units per time period can be sold at each price. Draw a new table and plot the resulting new AR, MR and TR curves on your diagrams. Are the new curves parallel to the old ones? Explain.
What can we say about the slope of the TR and TC curves at the maximum profit point? What does this tell us about marginal revenue and marginal cost?
Chapter 5

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture