Economies of scale or diseconomies of scale
1. Describe any two causes of economies of scale or diseconomies of scale. How is the U shape of long run ATC different from U shape of the short run ATC?
2. You are given the following information for units 0-6 that are produced by The Kimoneto Corp. of Miami, Florida. The average fixed cost of unit 4 is $38.50; The total variable cost of unit 3 is $165.00 while that of unit 6 is $522.50; The average total cost of unit 5 is $99.00, while the average variable cost of unit 4 is $55.00; The total cost of unit 1 is $247.50 while the total cost of unit 2 is $308.00.
a. Calculate the TFC, TVC, TC, AFC, AVC, ATC, and MC for units 0 though 6 based on the data above.
b. Explain in detail, you can use graphs if you like to help your explanation, how the TFC, TVC and TC are related to each other. Do NOT simply provide a formula to explain it.
Explain how the AVC and ATC are related to each other.
3. Explain the difference accounting profit, normal profit and economic profit. What role does explicit and implicit costs play in each? Why should we be concerned about the differences between these different types of profits? If normal profit is zero, is that good or bad from a business perspective? Explain
