Question

In the long-run a restaurateur with high set-up costs (e.g. $2,000,000 physical capital costs) would most likely:

Select one:

a. Have to be confident that her turnover would be sufficiently high to lower her marginal costs in the long-run.

b. Have to be confident that her marginal costs were below her average variable costs in the long-run.

c. Have to be confident that her marginal costs were going to decrease in the long-run.

d. Have to be confident that her sales would be at least at the minimum efficient level of production in the long-run.

Q	TC ($)
11	635
12	650
13	670
14	700
15	750
16	800
17	850
18	915
19	1,000
20	1,110

Based on the cost table above, the firm is operating with diseconomies of scale over which of the following output ranges:

Select one:

a. 11 to 14.

b. 16 to 20.

c. 14 to 17.

d. 18 to 20.

Q	TC ($)
300	2,000
320	2,100
340	2,210
360	2,300
380	2,385
400	2,465
420	2,535
440	2,605
460	2,670
480	2,730

Based on the long-run cost table above, the firm is experiencing diseconomies of scale over which of the following output ranges:

Select one:

a. The firm does not experience diseconomies of scale over any output range.

b. 380 to 420.

c. 300 to 360.

d. 440 to 480.

Quantity	Long-Run Total Cost
200	$ 80,000
300	$110,000
400	$140,000
500	$150,000
600	$180,000
700	$210,000
800	$260,000
900	$300,000
1000	$340,000

Based on the table above, can one determine if the restaurant experiences constant returns to scale, and if so, over what output range:

Select one:

a. Yes, constant returns to scale over the 500 – 700 range of output.

b. Yes, constant returns to scale over the 400 – 600 range of output.

c. Yes, there are no constant returns to scale.

d. Yes, constant returns to scale over the 500 – 800 range of output.

Answer 1