Consider a firm that produces ships and submarines. This firm's production transformation curves for two different input levels are illustrated in the figure to the right. In particular, the firm is using twice as many inputs at O₂ compared to 0₁. This firm experiences Furthermore, the firm experiences scale in the production of ships and scale in the production of submarines. Number of submarines 100- 90- 80- 70- 60- 50- 40- 30- 20 10- 10 20 0₁ 30 40 50 60 70 Number of ships 80 90
Consider a firm that produces ships and submarines. This firm's production transformation curves for two different input levels are illustrated in the figure to the right. In particular, the firm is using twice as many inputs at O₂ compared to 0₁. This firm experiences Furthermore, the firm experiences scale in the production of ships and scale in the production of submarines. Number of submarines 100- 90- 80- 70- 60- 50- 40- 30- 20 10- 10 20 0₁ 30 40 50 60 70 Number of ships 80 90
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.8P
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Part one:
a. no economies of scope
b. diseconomies of scope
or
c. economies of scope
Part two and three
a. no economies
b. economies
or
c. diseconomies
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