ASSIGNMENT1-EC0308
L. Are large firms more likely to have monitoring problems? If so, why
do large firms exist?
2. The managers of a Firm A recommend that Firm A purchase Firm B
because the purchase will diversify the business of Firm A
Diversification of risks is a desirable strategy for individual
shareholders, but if shareholders can diversify their risks by holding
stock in Firm B, is there any reason for Firm A to purchase Firm B
Suppose labour turnover is costly, could that provide an efficiency
saving to support the proposed purchase? (Hint: If output is less
variable, labor employment can be steadier).
2. In the short-run, practically all costs are fixed. Does that mean that
marginal cost is zero?
4. Suppose the cost of producing ql cars and q2 trucks is 10,000-70g1-
80q2. Calculate the marginal cost of producing cars and the measure
of scope economies when ql 300 and q2-200
5. Suppose there are a wide range of plant sizes in an industry. What do
you conclude about the shape of the average cost curve if the plants
are in the same area? Assume plants in the same area face similar
costs. How does your answer change if the plants are located in
different countries?
Important Information: Kindly use your name and your student number to
submit your assignment and also include it at the top of your assignment. In
addition, type your answers (Times new roman font, font size 12. 15
spacing) and submit in a PDF format.
