Question 2 First, economies of scale refers to a situation where a firm has the ability to produce large quantity of products at a very low cost when compared to other firms in the same industry. SRAC1 LRAC SRAC2 SRAC3 SRAC4 Diseconomies of scale Q1 Q2 Q3 Q4 Economies of scale constant economies of scale Given that there is only 2.5 demand for firms to reach the lowest point of averages cost curve, it is therefore expected that one firm not either not reach the lowest of LRAC, and or will remain struggling as illustrated in the above figure. For instance, the firm producing Q4 is under diseconomies of scale where the long run of producing each unit increases as output increases. Question 3 The consumers define inflation as the general increase in the cost of purchasing goods at least for a certain period. Nonetheless, it is worth sacrifice for a particular country to reduce consumer spending to promote the overnight economic growth. For instance, by increasing tax...
ECONOMICS TEST ASSIGNMENT Part A Answer all the three questions. Maximum of 250 words for each question. Use diagrams where appropriate to enhance and explain your response. Provide supporting evidence and references where appropriate to justify your arguments. Please note that in answering economic...
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