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Economies of scales, monopoly, specialization and trade

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Solution Summary

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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Please refer to the attachment (extra help6-1.docx) for the full solutions and graphs.

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

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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