Leeds International Study Centre 9 w7L04 The table shows the

Leeds International Study Centre 9 (w7L04). The table shows the production function of Jackie\'s Canoe Rides. Output (rides per day) Plant 2 Plant3 Labour Plant 1 Plant 4 10 20 30 40-S0 7585 40 65 60 75 75 90 100 85 100 Canoes (number) 10 0 20 Jackie\'s pays s100 a day for each canoe it rents and $50 a day for each canoe operator it h ires. Part 1. On Jackie\'s LRAC curve, what is the average cost of producing 40 rides a day? (Answer to two decimal places) Part 2. On Jackie\'s LRAC curve, what is the average cost of producing 75 rides a day? (Answer to two decimal places) plant l Average cast - loo /otsom- loo)+20 o 75 e ost. 1200333 75 Part 3. On Jackie\'s LRAC curve, what is the average cost of producing 85 rides a day? (Answer to two decimal places) Plant . 2 . Arevage cost- loox20150x40. 2000+200 .0b 6s- Part 4.What is level of output sn Jackie\'s minimum efficient scale? (Answer to two decimal places) The Jackie\'sming 75,00 625D 63.04 5001+ 300 Part 5. Jackie\'s production function features . A. only economies of scale B. constant returns to scale C. initially diseconomies of scale and eventually economies of scale D. initially economies of scale and eventually diseconomies of scale 4500 -69 23

Solution

Minimum efficient scale is the lowest quantity at which LRAC is lowest.

Hence it is is 65 canoes at which LRAC is lowest. Average cost is with 1 plant is equal to 38.46.

Option D is correct.

Jackie has economies of scale till 65 canoes and later it has diseconomies of scale, because till 65 average cost falls and average cost increases after increasing canoes greater than 65.