Question

Figure 13-9 The figure below depicts average total cost functions for a firm that produces automobiles. ADA Cost (5) Quantity of Automobiles per day Refer to Figure 13-9. This firm experiences diseconomies of scale at what output levels? a output levels greater than N b. output levels between Mand N Coutput levels less than M d. All of the above are correct as long as the firm is operating in the long run.

Answer 1

e say a firm enjoys an economies of seale when it can doubles els output for less than Awiee the cost and there are diseconomics of scale cohen a douleling of output require more than twice the cost. seale economics are often measured in terms of a cost output elasticity called Seale elasticity» – le = perces - in cast Percentage change _percentage change - in output de x100 X100 Lue LAC

when there is economies of seale le 1 that is Lue<LAE when there are discconomies of seale lett that is LMey Lae.

Led Атер SRMPA ATCA SRME Атев - 2 Here ATe is the long run average cost curve C Lae) It ean be seen that beyond Wo LMeYLAR so at output level greater than this form experievees diseconomies of Seale. so à is the correct option.