To my current econ students .....

Remember to bring your answer to the problem I gave in class on Thursday ---

Update the CPI values (all three years) if the base year was 2011 instead of 2010.  Use the market basket totals ($7.50, $5.25, $3.75) and the CPI formulas.  Be sure to multiply by 100.

                                                   

Coming Soon ...

... more mini-lectures on Microeconomics!  Check back for updates and more info and hopefully, the semester is going well so far.

Economies of Scale

Suppose L = 1 and K = 2 and the prices of each input are $10 so that TC = $30.  The Q produced is equal to 5 so that AC = TC/Q = $6.  If both inputs double (i.e., L = 2 and K = 4) and Q triples so that Q = 15, will AC rise, fall, or stay the same?  Is this an example of increasing, decreasing, or constant returns to scale?  Is this an example of a short run or long run concept, and why?