Waldman/Jensen – Industrial Organization Theory and Practice, Fourth Edition
Solutions to Even Numbered Problems
Chapter 2
Page 1
Chapter 2
Problem 2:
a. S = 1.196. There are a number of ways to calculate S. The easiest is to use the formula
Problem 4:
a. The production of shampoo exhibits economies of scale up until 2 units of output.
After that, the production of shampoo exhibits diseconomies of scale. There are two ways
qS
AC
1
5
2
4
4
5
8
8.5
b. Yes, it does exhibit economies of scale. For example,
qT
AC
1
5
4
1.5
9
.778
16
.5
100
.14