diseconomies of scale and diminishing marginal product
of the variable factor.
8. In the text, we stated that the LRAC curve initially slopes
downward because of economies of scale. In the previous chapter
we saw that the SRATC curve can initially slope downward
because of spreading overhead.
a. Explain the difference between economies of scale and
spreading overhead. Why is one a short-run concept and
the other a long-run concept?
b. Draw a diagram with short-run and long-run average cost
curves that illustrates for the same level of output both
economies of scale and spreading overhead.
9. This question combines the various concepts from Questions 7
and 8.
a. Draw a diagram with short-run and long-run average cost
curves that illustrates for the same level of output economies
of scale in the long run but diminishing marginal product
for the variable factor in the short run.
b. Draw a diagram with short-run and long-run average cost
curves that illustrates for the same level of output
diseconomies of scale in the long run but falling average
total costs in the short run.
