Question

You are given the following total cost information for four pharmaceutical facilities producing generic drugs. Costs are in thousands of dollars. Units produced are thousands of units per year. Each unit may consiste of a large number of pills, which are sold to the wholesale market. The value of buildings, land and equipment is in millions of dollars.
	Number of units produced ('000s)
Facility #	0	10	20	30	40	50	60
1	750	2250	3450	5050	8250	13250	20250
2	1000	2400	3600	4600	7000	11000	17000
3	1250	3450	3950	5210	7250	10250	15250
4	1500	2500	3100	3600	4600	6100	8100
Facility #	Value of buildings, land, and equipment ($'000,000)
1	4
2	7
3	5
4	6
Facility #	Opportunity cost of capital (annual %)
1	12
2	7
3	11
4	9

For each facility

Ignoring the opportunity cost of the building, land, and equipment, calculate:

1.) The minimum average variable cost.

2.) Assuming that a facility that minimized their average variable costs, the gain or loss if prices were 5% higher than your answer to (1). That is, price = your answer to (1) x 1.05.

Including the opportunity cost of the building, land, and equipment, calculate:

3.) The price that would ensure that economic profits are not negative.

Answer 1

the 6 from the above question and given all auta for 1st pharmaceutical facility Total unit poduced = 53250000 and the variable cost too ist facility M000, 000 s 30, Ave 2 z 4000, doo $3250 000 -0.075 for end, Arc 46600,00 2 0-150 for sro Ave 2 5,000,000 46610,000 20-107 20. for wth Ave .. so Minimum 6,000,000 --- 0.203 = 29500.000 Average cook is oo75 ☺ @ price = 8075'x1.5 for 1st facility for and a ne price a for gra, for uth, Economic price = 1.703*+ 0.107415 20-16 price = 0.20 3x1.5 = .0.30 profit = Total Revenue - explicit cost - Opposturile ③ and Total Kevenue = no of unit sold x price

for ist facility opportunity cost =4,000,000x12:4. 2UBO,000 2", opp. cost = 70.00,000 x 74. 2490,000 boy 3°, opp. Cost: 1900,000*#y. I. CÓ00, 000 x . = 550,000 Opp. Cost = 6000,000 92. = 540,000 for i Economic prodit / loss or (53250000 x 0.11) - 4000,000 – $80,000 O1377,500 - poolt for an protil-/ loss 2 (46600 000 X0-22)- 7000 000 - 4 = 2762,000 a profit for good prodit / loss 2/ 7 (46610 000X0-16) - 5000,000 - 550,00 = 1,907 1600 z poodit 0 for uth poodit (boss 13 (295500, mox 6-30) - 6000,000 - 540,620 = 2,310,000 - poradit.