Differentiate between External and Internal Economies of Scale.
External and internal economies of scale are concepts in microeconomics that relate to the cost advantages and efficiencies that firms can achieve as they increase their level of production.
1. Internal Economies of Scale:
Internal economies of scale refer to cost savings and efficiencies that a single firm experiences as ___ ___ ___ ________ ___.
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With the help of a diagram, explain the conditions of a producer’s equilibrium in terms of marginal cost and marginal revenue approach.
Consider the demand curve AD of a good in Figure 1. The distance AB, BC and CD are equal to x, y and z units, respectively. In terms of x, y and z, what will be the price elasticity of demand for the good at points A, B, C and D?
Differentiate between changes in demand and changes in quantity demanded.
Compare and contrast a normal, an inferior and a Giffen good in terms of income elasticity of demand.
Discuss the income and substitution effects of a price change in case of a normal good.
(a) Differentiate between a long-run and a short-run cost function.
(b) (i) Describe the relationship between the short-run and long-run average cost curves.
(ii) Why the long-run average cost curve also called the envelope curve?
(iii) Using an appropriate diagram, explain how does the long-run marginal cost derived?
With the help of a diagram show the effect of the minimum wage rule on the labour market given the wage is set above the market equilibrium wage rate.