A firm finds that at an output level of 7 units, its total cost is $1834; at 8 units of output,...


A firm finds that at an output level of 7 units, its total cost is $1834; at 8 units of output, its cost is $2048.

a. Measuring economies of scale calculate the value of S for this firm at 8 units of output.

b. Are there economies of scale at 8 units of output? Explain.

c. Explain what the value of S tells about the relationship between increasing output and increasing costs for this firm.

Economies Of Scale:

The scale for a firm is an increase in its production capacities. The economies and diseconomies of scale are possible only in the long run because capital is the variable input and can adjust its production capabilities as per its need.

Answer and Explanation: 1

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a) Calculating the value of S

  • The average cost at 8 units of production is $256 ($2,048 / 8)
  • Marginal cost for producing the 8th unit = Total cost...

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Economies of Scale: Definition, Benefits & Examples


Chapter 3 / Lesson 41

Explore the principle of economies of scale and delve into several real-world examples. Learn the formula for determining economies of scale as well as their types, benefits, inputs and the factors that influence them. Discern the limits of economies of scale and find out the difference between economies of scale and diseconomies of scale.

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