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8 marksTheory of Supply

CAPE Economics Unit 1 · 2006 · Paper 2 · Question 2(d)(ii)

Explain how economies and diseconomies of scale influence the shape of the long-run average cost curve of a firm.

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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(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.[9 marks]
  4. 2(b)Explain the law of diminishing returns.[6 marks]
  5. 2(c)(i)Constant returns to scale[2 marks]
  6. 2(c)(ii)Increasing returns to scale[2 marks]
  7. 2(c)(iii)Decreasing returns to scale[2 marks]
  8. 2(c)(iv)Economies of scale[2 marks]
  9. 2(d)(i)Discuss one reason for economies of scale and one reason for diseconomies of scale.[8 marks]

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