M01 broo6651 1e sg c01

b. Are there economies or diseconomies of scale

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Ch07
Ch03, sol 03, sol 03

b. Are there economies or diseconomies of scale
There are diseconomies of scale. Holding cumulative output, Q, constant, there are diseconomies of scale if the average cost increases as annual output q increases. In this example, average cost increases by $0.30 for each additional one thousand computers produced, so there are diseconomies of scale.
c. During its existence, the firm has produced a total of 40,000 computers and is producing
10,000 computers this year. Next year it plans to increase production to 12,000 computers.

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