Firm experiences increasing returns to scale

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(a) For the production of the type Q = 2K + L with wage rate w = $1 and price of capital (rental rate) v = 1, the expansion path is K axis. Do you agree?

(b) If any firm experiences increasing returns to scale in a perfectly competitive industry then the industry cannot remain perfectly competitive. Do you agree?

(c) The most efficient scale production is where AC = MC. Do you agree?

(d) Isoquants cannot be positively sloping. Why or why not?

(e) When the quantity of a good is fixed (e.g., Rembrants paintings) the supply curve is always perfectly inelastic (i.e., vertical). Do you agree?

Reference no: EM13981432

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