Questions: The figure to the right illustrates the long-run average cost curve for a company that makes motors. Suppose the company produces 17 thousand motors per month. Is it experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the company produces 17 thousand motors, then it experiences

The figure to the right illustrates the long-run average cost curve for a company that makes motors. Suppose the company produces 17 thousand motors per month. Is it experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the company produces 17 thousand motors, then it experiences
Transcript text: The figure to the right illustrates the long-run average cost curve for a company that makes motors. Suppose the company produces 17 thousand motors per month. Is it experiencing economies of scale, diseconomies of scale, or constant returns to scale? If the company produces 17 thousand motors, then it experiences $\square$
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Solution

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Solution Steps

Step 1: Identify the Quantity Produced

The company produces 17 thousand motors per month.

Step 2: Locate the Quantity on the Graph

Find the point on the x-axis corresponding to 17 thousand motors per month.

Step 3: Determine the Long-Run Average Cost at 17 Thousand Motors

Observe the long-run average cost curve at the quantity of 17 thousand motors. The curve is increasing at this point.

Step 4: Identify the Type of Scale

Since the long-run average cost is increasing as the quantity increases, the company is experiencing diseconomies of scale.

Final Answer

If the company produces 17 thousand motors, then it experiences diseconomies of scale.

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