21. What factors can lead to diseconomies of scale? Difficulty managing an enormous company, lack of worker loyalty. Difficulty supervising large numbers of workers. See page 212 for an explanation. 22. If a firm’s long-run average total cost is decreasing, then the firm is experiencing ______economies of scale____________________________________. 23. If a firm’s long-run average total cost is holding steady, the firm is experiencing ______constant returns to scale____________________________________. 24. If a firm’s long-run average total cost is increasing, then the firm is experiencing _______diseconomies of scale___________________________________. See the graph at the top of page 406 for a visual representation. 25. Look at figure 9.7 on page 209. Why would a firm only consider the parts of the 5 different ATC curves in purple? (Why wouldn’t the parts in red be part of their long-run Average Total Cost curve? Because the purple parts of the curves are always less expensive than the red parts. For example, if the firm wanted to produce 55 units of output, it should choose the plant size associated with ATC-4. Its only other option is to choose plant size associated with ATC-3, but costs would be greater with this option. The same applies at every point along the curve. The plant size associated with the purple segments of the curve always involves lower costs.
21. What factors can lead to diseconomies of scale? Difficulty managing an enormous company, lack of worker loyalty. Difficulty supervising large numbers of workers. See page 212 for an explanation. 22. If a firm’s long-run average total cost is decreasing, then the firm is experiencing ______economies of scale____________________________________. 23. If a firm’s long-run average total cost is holding steady, the firm is experiencing ______constant returns to scale____________________________________. 24. If a firm’s long-run average total cost is increasing, then the firm is experiencing _______diseconomies of scale___________________________________. See the graph at the top of page 406 for a visual representation. 25. Look at figure 9.7 on page 209. Why would a firm only consider the parts of the 5 different ATC curves in purple? (Why wouldn’t the parts in red be part of their long-run Average Total Cost curve? Because the purple parts of the curves are always less expensive than the red parts. For example, if the firm wanted to produce 55 units of output, it should choose the plant size associated with ATC-4. Its only other option is to choose plant size associated with ATC-3, but costs would be greater with this option. The same applies at every point along the curve. The plant size associated with the purple segments of the curve always involves lower costs.