Question
Question.1
Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant.
a. Define opportunity cost.
b. What is your aunt’s opportunity cost of running a hardware store for a year? If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store? Explain.
Question.2
If Boeing produces 9 jets per month, its long-run total cost is $9.0 million per month. If it produces 10 jets per month, its long-run total cost is $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale?
Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant.
a. Define opportunity cost.
b. What is your aunt’s opportunity cost of running a hardware store for a year? If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store? Explain.
Question.2
If Boeing produces 9 jets per month, its long-run total cost is $9.0 million per month. If it produces 10 jets per month, its long-run total cost is $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale?
Answers
Bot
a. Define economies of scale.
b. Does Boeing exhibit economies or diseconomies of scale? Explain.
b. Does Boeing exhibit economies or diseconomies of scale? Explain.