Quelpr
9 marksTheory of Supply

CAPE Economics Unit 1 · 2006 · Paper 2 · Question 2(a)(iii)

With the aid of the diagram on page 3, explain why production tends to occur in Stage TWO of the production stages rather than Stage ONE or Stage THREE.

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Other parts of this question

  1. 2(a)(i)Define the term 'production function'.[2 marks]
  2. 2(a)(ii)State where each of the three stages of production begins and ends.[9 marks]
  3. 2(b)Explain the law of diminishing returns.[6 marks]
  4. 2(c)(i)Constant returns to scale[2 marks]
  5. 2(c)(ii)Increasing returns to scale[2 marks]
  6. 2(c)(iii)Decreasing returns to scale[2 marks]
  7. 2(c)(iv)Economies of scale[2 marks]
  8. 2(d)(i)Discuss one reason for economies of scale and one reason for diseconomies of scale.[8 marks]
  9. 2(d)(ii)Explain how economies and diseconomies of scale influence the shape of the long-run average cost curve of a firm.[8 marks]

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