Question

1) Market 3 is characterised by the following cost function: C(x)=0.5 x ². Is this technology characterised by increasing, constant or decreasing returns to scale? Is this a natural monopoly? Y/N {Hint: when making the comparison, it might help to fix the value of X and the number of firms N: for instance, X=4 and N=4}

2) Market 4 is characterised by the following cost function: C(x)=0.5 x ²+36. Is this technology characterised by increasing, constant or decreasing returns to scale? {Enter I for increasing, C for constant or D for decreasing}

3) Is this a natural monopoly? Y/N  {Hint: when making the comparison, it might help to fix the value of X and the number of firms N: for instance, X=4 and N=4}

Answer 1

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