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Analysis of technological change on the minimum efficient scale of production.

1. Suppose which the graph on the next page illustrates the marginal, average variable also average total cost curves of a typical coffee grower also which the wholesale marketplace for coffee beans is a perfectly competitive marketplace.

A) As output expands, at Illustrate what level of output does this grower first start to experience diminishing marginal productivity of labor?

B) Suppose which the current marketplace price at the wholesale level is $5 per pound. describe how much coffee will this typical grower produce?

C) Is there a price below which the grower will not bother to cultivate & harvest his crop, but will just let the beans rot on the tree?

D) Suppose which as the industry expands (or contracts) the prices of the variable inputs it uses do not change. Is $5 per pound the long run equilibrium price in this marketplace? If so, Elucidate why. If not, Elucidate why not also identify the long run equilibrium price.

E) Suppose there is a shortage of experienced farm labour in the coffee growing regions, so which as the industry expands the wages paid to farm labour rise. describe how would this affect your conclusion in part (D) about the long run equilibrium price of coffee?

F) Suppose which technological innovation in coffee cultivation greatly reduced the amount of labour used per ton of beans harvested but required farmers to invest in substantially more large scale capital equipment also computerized hydration management systems.

Draw a diagram illustrating the effect on the typical grower's average total cost curve. (i.e. draw a "before" also "after" ATC schedule). Illustrate what is the effect of this technological change on the minimum efficient scale of production?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916639

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