Suppose There Is a Technology to Produce Grendels Such That

question 76

Multiple Choice

Suppose there is a technology to produce Grendels such that there are diseconomies of scale after the first unit is produced. There are both fixed (a physical plant called a lair) and variable (food that grows in lairs) costs of production. Which statement is true ?

• A) b and d.
• B) Producing multiple units increases the average fixed cost.
• C) There will be no more than one firm in this industry.
• D) It is cheaper to make five Grendels by buying five lairs and producing one Grendel in each lair than it is to produce five Grendels in one lair.
• E) This is an impossible situation.

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