The production/distribution model given in the text [formulation (8.70)– (8.75)] assumed that there were no economies or diseconomies of scale in production. (Economies of scale imply that over the...

The production/distribution model given in the text [formulation (8.70)– (8.75)] assumed that there were no economies or diseconomies of scale in production. (Economies of scale imply that over the relevant range of production the unit cost decreases with increasing output. Diseconomies of scale mean that the unit cost of production increases with increasing levels of output over the relevant range of production.)

(a) If the production process exhibits diseconomies of scale, modify the formulation to account for the increasing unit costs of production.

(b) Would the approach you outlined in part (a) work if the production process exhibits economies of scale? Briefly justify your answer.