a) A firm should stop expanding output after reaching
diminishing returns
b) If large and small firms operate in the same industry,
we must have constant returns to scale.
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BUSI 620 Week 4 Discussion Board 4
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Question #1 - Tetrangle Manufacturing has fixed costs of
$2,160 per day. The firm manufactures bicycle
component upgrade kits. The kits have a short-run
average variable cost of $48 and are sold for $66 each.
What is the breakeven level of daily output for the firm?
What is the degree of operating leverage when the daily
output is Q = 170?
Question #5 - As an employer wants to reduce the
production cost during the economic recession, he/she
could choose to (1) lay off some workers without changing
wages or (2) keep all workers but cut wages for all. Which
method would you choose? Why?
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