Economies of Scale and Long-Run Costs- Micro Topic 3.3

Jacob Clifford introduces economies of scale using movie examples, explaining the difference between short-run and long-run production. He discusses returns to scale, where output can more than double, double, or less than double with increased inputs. Economies of scale lead to lower average costs as production increases, exemplified by movie productions. However, costs can level off or increase, leading to constant or diseconomies of scale. Finally, Clifford emphasizes that production decisions should consider consumer demand, not just costs, to maximize profit.

What do the Twilight, Harry Potter, and Lord of the Rings movies have in common according to the video?

• They are all based on books.

• They all had economies of scale.

• They were all directed by the same person.

• They were all released in the same year.

What happens to a firm's output if it experiences increasing returns to scale?

• Output remains the same.

• Output less than doubles.

• Output more than doubles.

• Output decreases.

How does producing multiple movies at once affect the average cost according to the video?

• It has no effect on the average cost.

• It decreases the average cost.

• It doubles the average cost.

• It increases the average cost.

What is the term used when a company's average cost starts to increase as more is produced?

• Economies of scale

• Constant returns to scale

• Diseconomies of scale

• Increasing returns to scale

Why might a firm not always produce at the lowest long-run average cost?

• Because they have unlimited resources.

• Because they want to produce as much as possible.

• Because they need to consider consumer demand.

• Because they want to minimize costs.