Score: 0.33 of 1 pt 22 of 28 (27 complete) HW Score: 93.2 Concept Question 5.5 C

Question

Score: 0.33 of 1 pt 22 of 28 (27 complete) HW Score: 93.2 Concept Question 5.5 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 o This firm experiences economies of scope. of scale in the production of ships and Furthermore, the firm experiences of scale in the production of submarines. 0 10 20 30 40 50 60 70 80 90 100 Number of ships

Explanation / Answer

The answer to both blanks are diseconomies of scale (DOS)

The reason is that economies of scale implies falling opportunity cost and when both industries are experiencing economies of scale, PPF is convex to origin. Here PPF is bowed outward which means there are DOS.

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