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This question was created from Assignment 7 Production and Costs.docx https://www.coursehero.com/file/42174737/Assignment-7-Production-and-Costsdocx/

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5) In the text it was determined that the LRAC curve eventually slopes upward because of
diseconomies of scale, while the SRATC curve slopes upward because of diminishing
marginal product of the variable factor.
a) Explain the difference between diseconomies of scale and diminishing marginal
product of the variable factor. Why is one a short-run concept while the other is a
long-run concept?
b) Draw a graph with short-run and long-run average cost curves that illustrates for
the same level of production both diseconomies of scale and diminishing marginal
product of the variable factor.
c) What is the name given to the relationship between the short-run and long-run
average cost curves?

Top Answer

a) Diminishing returns relates to the short run - higher SRAC.Diseconomies of scaleis... View the full answer

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