Why is it that when small firms get bigger (increase their scale), they frequently see their average total costs decrease?

Q1.
When market equilibrium occurs, quantity demanded is equal to quantity
supplied, which means that both sellers and buyers get what they want. Does a
market reach market equilibrium on its own, or is it necessary to have some
sort of regulator to manage the price and ensure there is equilibrium? Explain
your answer carefully. (4Marks)

Q2.
Many countries around the world have some sort of minimum wage law. Explain why
the minimum wage may hurt workers as much as help them. Give some ideas as to how
the government could help workers more effectively. (4Marks)

Q3.
Why is it that when small firms get bigger (increase their scale), they
frequently see their average total costs decrease? (4Marks)

Q4.
How is it possible that a firm in a perfectly competitive market is able to
sell all it wants without having to change the price? What does this tell us
about the elasticity of demand faced by the firm? (4Marks)

Q5. When a firm sells an additional unit of the
good it produces, it receives in exchange money worth the price of the good.
Explain why, when a monopolist sells an extra unit, its marginal revenue is
less than the price, while this is not true for a firm in a perfectly
competitive market?

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