2. (a) If a production function exhibits decreasing returns to scale and the quantity of all inputs is halved, what happens to output? (b) If a production function exhibits decreasing returns to scale and the scale of output is halved, what happens to the average cost per unit produced?

2. (a) If a production function exhibits decreasing returns to scale and the quantity of all inputs is halved, what happens to output? (b) If a production function exhibits decreasing returns to scale and the scale of output is halved, what happens to the average cost per unit produced?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 4QR

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Concept explainers

Cost of Production

The entire idea of the cost of production or production cost is applied corresponding, or we can say that it is related to monetary cost. Money cost refers to any money expenditure which the firm or supplier, or producer undertakes in purchasing or hiring factor of production or factor services.

Question

Topic: : Cost function, economies of scale, technological change

2. (a) If a production function exhibits decreasing returns to scale and the quantity of all inputs
is halved, what happens to output? (b) If a production function exhibits decreasing returns to
scale and the scale of output is halved, what happens to the average cost per unit produced?

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