Question

16. Explain how the scale effect could change the ou cost of capital at Araceli's Earrings). w the scale effect could change the outcome of 11c above (concerning an increase in the

Answer 1

23:40 O:20 6 February 12, 2020 ♡ : - cost 25kL + x 25K + c. 8L + UK o8L uk) (-1) = SK SA اک لما 25L + (-4) K : 2 K. 2L K/L: 2.1 : 5 . 2) 1.6 SA 25 K 25L 20000 K. 8 L 5 K & 16 25x K x K* 36 L. 23 W Edit Delete Share

- Cost: 360 e + 23w 36x5 + 23% 8 - 364
when the cost of capital goes up, the cost function changes. Due to this the ratio of K and L changes. Due to this the profits also change.

So this change in r can change the K and L ratio