Top Posters
Since Sunday
r
4
L
4
3
d
3
M
3
l
3
V
3
s
3
d
3
a
3
g
3
j
3
New Topic  
Helen Kebede Helen Kebede
wrote...
Posts: 120
Rep: 2 0
A year ago

The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes.

Short description: A graph plots output against cost. Long description: The horizontal axis represents output. The vertical axis represents the cost. The graph plots four U-shaped curves. A large U-shaped curve representing LRAC passes through the points, A, C, E, and F. Vertical dashed lines are extended from A, C, E, a point, and F to meet the horizontal axis at Q subscript 1, Q subscript 2, Q subscript 3, Q subscript 4, and Q subscript 5. It encloses three small U-shaped curves. The first curve on the left represents SRATC subscript 1 and it intersects the large curve at A and passes through a point, B. The second curve at the center represents SRATC subscript 2 and it intersects the large curve at E. It also intersects the first curve at a point and it passes through a point, D. The third curve on the right represents SRATC subscript 3 and it intersects the large curve at F. It also intersects the second curve at a point.

FIGURE 8-2

Refer to Figure 8-2. Should this profit-maximizing firm ever consider moving from point E (output level Q3 on SRATC2) to point F (output level Q5 on SRATC3)?



▸ Yes, because the firm can take advantage of economies of scale.

▸ Yes, because SRATC3 is the optimal plant size for this firm.

▸ No, because they are already producing at their lowest possible cost at point E.

▸ Yes, if the product price rises enough to lead the firm to expand to plant size 3.

▸ No, because producing at point F implies a higher cost per unit of output.
Textbook 
Microeconomics

Microeconomics


Edition: 17th
Author:
Read 52 times
1 Reply
Replies
Answer verified by a subject expert
jchang19jchang19
wrote...
Posts: 140
Rep: 0 0
A year ago
Sign in or Sign up in seconds to unlock everything for free
More solutions for this book are available here
1

Related Topics

Helen Kebede Author
wrote...

A year ago
Helped a lot
wrote...

Yesterday
Thank you, thank you, thank you!
wrote...

2 hours ago
Good timing, thanks!
New Topic      
Explore
Post your homework questions and get free online help from our incredible volunteers
  2122 People Browsing
Related Images
  
 332
  
 9038
  
 733
Your Opinion
Who's your favorite biologist?
Votes: 608

Previous poll results: How often do you eat-out per week?