Define the terms economies of scale, constant returns to scale, ...

[jwb375]

Define the terms economies of scale, constant returns to scale, and diseconomies of scale. Among these three situations, operating in which stage is likely to be most profitable for a firm?
 
  What will be an ideal response?

Question 2

Refer to the scenario above. What is the present value of the gift voucher for Susan?
 
  A) 30 utils
  B) 45 utils
  C) 90 utils
  D) 180 utils

[momo1250]

Answer to Question 1

Economies of scale occur when the average total cost falls as the quantity produced increases.
Constant returns to scale exist when the average total cost does not change as the quantity produced changes.
Diseconomies of scale occur when the average total cost rises as the quantity produced increases.
Operating at a stage where economies of scale occur is likely to be most profitable from a firm's point of view. This is because it allows a firm to expand its production with a decrease in the cost incurred per unit of additional output produced.

Answer to Question 2

B

[jwb375]

Thank you

[momo1250]

Happy to help you