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Economies of scales, monopoly, specialization and trade

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This solution provides explanations on how to solve problems related to economies of scale, which is a long run concept whereby a firm is able to reduce the long-run average cost due to the increase in size, as well as problems looking at monopoly, specialization, and trade.

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1. Consider each of the following industries and explain why you would OR would not expect it to exhibit large economies of scale. Answer in 2-4 sentences for each industry.

A. Aircraft manufacturing
B. Higher education
C. Accounting services

Answer:
A. Aircraft manufacturing: This industry requires economies of scale due to the nature of the product. It requires a very high start-up cost and expensive technology. Investment in R&D is crucial for technological development and it takes a very long time to get its return.

B. Higher education: requires large ...

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