# (Solved): A business whose only inputs are labour and capital expands its employment level in the long run fro ...

A business whose only inputs are labour and capital expands its employment level in the long run from 12 to 18 workers and its capital from 4 to 6 machines. Write out dollars and cents, e.g. \$1.00 or \$0.10 for any monetary amounts entered as a solution below. Assuming that the daily wage of \$100 and the daily upkeep (including wear and tear) per machine of \$20 remain constant in the long run, identify the relevant returns to scale and the change in long-run average cost if daily output were to expand in each of the following possible ways. a. If daily output expands from 80 to 160 units then in this output range the business is experiencing returns to scale while long-run average cost is . At 80 units long-run average cost is \$ and at 160 units it is \$ . b. If daily output expands from 80 to 120 units then in this output range the business is experiencing returns to scale while long-run average cost is . At 80 units long-run average cost is \$ and at 120 units it is \$ . c. If daily output expands from 80 to 106 units then in this output range the business is experiencing returns to scale while long-run average cost is . At 80 units long-run average cost is \$ and at 106 units it is \$ .

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