a. The SRATC curve is drawn for a given plant size. Given
this plant size, what is the level of output that minimizes
short-run average costs? What are unit costs in the short
run at this level of output?
b. What is the level of output for which this plant size is
optimal in the long run? What are unit costs in the short
run at this level of output?
c. Explain the economics of why is greater than
d. Suppose the firm wants to increase output to in the
short run. How is this accomplished, and what would unit
costs be?
e. Suppose the firm wants to increase output to in the
long run. How is this accomplished, and what would unit
costs be?
13. This question relates to the material in the Appendix. The
following table shows several methods of producing 500 rubber
tires per day. There are two factors, labour and capital, with
prices per unit of $3 and $6, respectively.
c 1 c 4.
Q 2Q 2