CHAPTER6ReviewQuestions1
Adownwardslopingaveragecostcurvereflectseconomiesofscalesinceincreasedoutputofthefirmlowersit'sunitcosts
Giventhatthefirm'sfixedcostsare$20andthemarginalcostofproductionis$2perunit,howdoaveragecostschangeasproductionincreasesfrom5to10to20to40units
Discusstheintuitionbehindyourresponsetoparta
Inthefigurebelow,graphtherelationshipbetweenoutput,andaverageandmarginalcosts
Asoutputgetsextremelylarge,whathappenstoaveragecost
Whatistherelationshipbetweenaveragecostandthenumberoffirmsinanindustry
Considertheproductiondecisionofahigh-endproducerofDVDplayerswhobehavesasamonopolisticcompetitorfacingademandcurvewithparameterb=l/1000
Fixedcostsare$500,000andthemarginalcostofproducingaDVDplayeris$100
SupposeHomehasannualDVDplayersalesof50,000units
GraphthePPand