Question

You manage a plant that mass produces engines by teame of workers using assembly machines. The chrologie summarized by the production function - 10KL Where is the number of engines per week. Kis the number of assembly machines, and is the number of labor teams. Each assembly machinerents for re$10,000 per week, and each team costs w $8,000 per week Engine costs are given by the cost of labor teams and machines, plus $1,000 per engine for raw materials. Your plant has a freed installation of assembly machines as part of its design The total cost of producing a units of output (TC) OA TC-50,000+ 0,0000 TC-8,000 +3,000 OCTC-50,00011,000 00 TC-8000 OE TC-60.000 1.000363.000 The average cost (AC) of producing machinesis ОА 50,000 OD 50.000 AC- 3.160 Ос OD 50,000 AC -50.000 - 8.000133.0000 AC- AC OE 50,000 AC- +3.000 The marginal cost (MC) of producing machines a O AMC -3,160 OB MC-31604 OC MC -3.0004 OD MC-1600 OE MC160 How do average costs vary with output? As Quantity increases, average costs How many brams are required to produce 250 ergires? To produce 250engines. nor trams) are required. (Enter your response rounded to two decimal places) The average cost per engine winter your response as an integer) You were asked to make recommendation for the design of a new production tacity. What capihallaber (2) ratio should the new plant accommodate it wants to minimize the total cost of producing at any level of output? The firm should use units of capital for every unit of labor and Enter your response rounded to two decimal places)

Answer 1

The po duction ur сhой и q = 10kL q number of engines number of assembly per week. K machine. teams L number of labour cost of each assembly machine. ro $ 1 booo 5 assembly machine u in stalled as fixed cost $10000 85 50 000 W = $8000 Raw material cost per engine $ 3000 Each labour team Raw material and labour Themefore, (1 Total cost To fal fixed + Total variable To 5000o +8ooo +3000 q en 50 Ophion E

cost is ave verage the pelu unit of It is Die fuo duction output in the obtained AC TC q Te = 5000o + 8000 (q ( 9 + 3000 R AC 5000s c +3000 q 2 오 q AL = 8 000 + 3000 scovo q so AC soooo + 160 + 3000 q 2 AC Soovo +3160 q Option B 2/4

(3) The Marginal cost 'ls the increase in the cost for cost for increasing one of output. The me is the un't obtained MC d (TC) dq TC 5000o of sooolg toleo +3000 a MC d(Te) 8000 + 3000 Me 3160. loption A with cost are mage vary (4) How do output ? As the quantity increases, average lost decreases. As the quantity increases fixed cost is better willsed as the anlage of the output falls. t per unit of the

(5) How many are required to 50.00 lab our teams engines required. . produce a50 teams are q = 10kL 250 = 10ҳCXL २६० > 50 L 250 ا = so → 50 L The average cost ser engine will be + 3000 t160 porro 50 200 + 3000 +60 = $3360 design of a -6) You are asked to make the commendatio for the design new production facility ratio The firm should units of capstal with labouw. use 3 4/4
I have numbered questions in serial order as it was not numbered.

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