Author Question: What is the optimal scale of plant? What will be an ideal ... (Read 72 times)

kellyjaisingh · **on:** Jun 29, 2018

What is the optimal scale of plant?

What will be an ideal response?

Question 2

Why are indifference curves convex to the origin?

What will be an ideal response?

Sarahjh · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The optimal scale of plant is the scale of plant that minimizes long-run average cost.

Answer to Question 2

Indifference curves are convex because of diminishing marginal utility. When a consumer has a large amount of good Y (and a small amount of good X), he will be willing to give up a great deal of good Y to receive a little more of good X. However, if the individual has only a small amount of good Y and a large amount of good X, he will not be very willing to give up good Y to receive more of good X.