Question

27. Draw the isoquant-isocost line graph that illustrates the following: Jill Johnson can rent pizza ovens for $200 per week and hire workers for $100 per week. She can minimize the cost of producing 20,000 pizzas per week by using 5 ovens and 10 workers at a total cost of $2,000 (point A). She can minimize the cost of producing 50,000 pizzas per week by using 10 ovens and 20 workers at a total cost of $4,000 (point B). And she can minimize the cost of producing 60,000 pizzas per week by using 15 ovens and 30 workers at a total cost of $6,000 (point C). Using this information, sketch Jill's long-run average cost curve. scale and then _scale. Jill's pizza production initially experiences a. minimum efficient; economies of. b. economies of; diseconomies of. c. diseconomies of; minimum efficient. d. diseconomies of economies of e. economies of; minimum efficient.

Answer 1

222 Point A describes cost of producing Pu week by using that she can minimize the 50,000 pizzas 2000 Pizzas the bundle (510), Point B de suibus that she can minimize the cost a producing 50,000 Pizza; pn wilk by using the bundle ( 10, 20) | point e describes that she can minimize the cost of producing 60,000 Pizzas per week by using the bundle (1530) for Point A isocost line will be! Assuring WC denote Pizza oven by 'K' and workers by 2' and total cost is $2,000 Dining og 1. Hunce here w= 7= To tal cost= whtoke loot $100 1 week $200/locek sa JOD) -> -> Total cost = 100L + 2010 F 100L + 200 K 200 K S <= I here it wc potot plot workus along horizontal I anis and pizz ovens (k) along the unitical anis, then the horizontal in tucept of the iso cost I line [assning K=o] will be sood ☆ 1- 2000 - 20 and the uutical in tucept of the iso cost line [ pulting L=0 => 2000 = k 2010 =) K= 10 Sechnedlazith alh Scanner

for Point B Isocost line will be atas 10 4,000 = loolt acok Hue horizontal intucept [pulting k ol. 2 = 4000 -40 s and vitical intuceft [Pulting L=o rtar to 400- 200K Sko 400. 20.02jAE for point e cost d 2200 botot luo Iso cast line will be on DHT Don 1. Ewen! 6000 = 100L + 200 Kos 15 the horizontal intucept [pulting kao - Ca ( -> = 6 08 D - | AZ GA 60 and vutical intacept putting to em no 2017 6000 - 200k 7 k-30 out canned Wit L 'amScanner CMOS

Now, we can iso cost lines draw and three iso quants and 3 3 optimal bundles Pizzaovens 2 . 1 20 IS - B W workus! Tous 202 30 40 50 60 2. O acest and I now the to find long rin avuage cost we can compute table in Quantity of Pizza longren awwage cost Total cost ce) les 20,00 0.1 2000 4,000 $0,000 0.08 6,000 60,000 ol selned with Can Scanner

Se t urintis LAC Cost OT 009 0.08 -0.07 0.06 olos 0.04 1003 O-az Dot 10,00 20,000 30,000 40, no Qucitity or Soos - Pizza Hace Till'z pizza" production initially Economics of scale and them dis economies of scale. enprinces As first scated wo.08 CamScanner the awnage cost falls from oilou and then in reass to o. Da