Exam 12: Production and Cost Analysis II

You have decided to produce and market a new basketball sneaker. What decisions do you need to make besides how many shoes to produce?

In the basic model, cost changes only as output changes. In the real world, at least four other factors affect real-world costs. They are: (1) economies of scope, (2) learning by doing and technological change, (3) multidimensionality, and (4) unmeasured costs. Explain how each of these influences cost analysis.

Suppose you can manufacture a Blu-ray player using 5 people and 1 machine or using 1 person and 3 machines. Is it possible that both input combinations are technically efficient? What information would be needed to determine which input combination is economically efficient?