MGEC40H3 Chapter 2: Chapter 2 textbook ( 4th edition)

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violethyena446

19 Apr 2011

School

UTSC

Department

Economics for Management Studies

Course

MGEC40H3

Professor

Jack Parkinson

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Document Summary

economies of scale & scope: exist whenever large-scale production has a cost advantage over small processes. Ie landscaping & tailoring don"t have substantial scale economies. affect the size of firms, structure of markets, they are fundamental to diversification & merger strategies. affect pricing, entry/exit, & the ability of the firm to secure a long tern sustainable advantage. economies of scale: exists when ac declines as output increases. exists if the firm achieves unit cost savings as it increases the production of a good or sevice. which implies that the mc of the last unit produced is < ac. ( mcac , ac increases as q increases. ac curve: shows the relationship between ac and q. it"s a u curve. Ac decline over low levels of output & rise over higher levels of output.

Related Questions

1. The law of diminishing marginal productivity states that

a. As you expand output, your marginal productivity eventually increases

b. As you expand output, your marginal productivity eventually declines

c. As you expand output, the total product eventually increases

2. What are economies of scale?

a. decreasing average costs as production increases

b. increasing average costs as production increases

c. increasing fixed costs as production increases

d. None of the above

3. What are economies of scope?

a. lower average costs when multiple different products are produced

b. higher average costs when multiple different products are produced

c. Constant average costs when multiple different products are produced

d. None of the above

4. It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries. If Firm A merges with firm B, it can produce both the five radios and the five batteries for $1000. The firm has experienced

a. Economies of scale

b. Economies of scope

c. Diseconomies of scale

d. Diseconomies of scope

5. It costs firm A $800 to produce five radios and it costs firm B $500 to produce five batteries. If Firm A merges with firm B, it can produce both the five radios and the five batteries for $1500. The firm has experienced

a. Economies of scale

b. Economies of scope

c. Diseconomies of scale

d. Diseconomies of scope