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Question

# Lynette owns a bakery. If she expands the size of her bakery she finds

that her average total cost of producing bread remains unchanged in the long run. What type of returns to scale would you say Lisette is experiencing (increasing, constant or decreasing)? Also, her average total cost to produce 100 cookies is \$0.25 per cookie. The marginal cost is constant at \$0.10 for all cookies produced. Can you calculate her total cost to produce 100 cookies?

What if her average total cost had decreased; what type of economies of scale would she be experiencing?

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