8. Engineers sometimes rely on the "0.6 rule," which states that the increase in cost is given by the increase in capacity raised to the 0.6 power; that is, C, = C,(X,/X,)06 where C, and C, are the costs of two pieces of equipment, and X, and X, are their respective capacities. a. Does the 0.6 rule suggest economies of scale? b. Some experts have stated that in the chemical and metal industries, the 0.6 rule can be applied to entire plants rather than individual pieces of equipment. If so, will the long-run average cost curve in these industries tend to be negatively sloped? Can vou think of a way to test whether this rule is correct? C.

8. Engineers sometimes rely on the "0.6 rule," which states that the increase in cost is given by the increase in capacity raised to the 0.6 power; that is, C, = C,(X,/X,)06 where C, and C, are the costs of two pieces of equipment, and X, and X, are their respective capacities. a. Does the 0.6 rule suggest economies of scale? b. Some experts have stated that in the chemical and metal industries, the 0.6 rule can be applied to entire plants rather than individual pieces of equipment. If so, will the long-run average cost curve in these industries tend to be negatively sloped? Can vou think of a way to test whether this rule is correct? C.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter7: Production, Costs, And Industry Structure

Section: Chapter Questions

Problem 33CTQ: Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then...

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