Question

quantity of printing presses 70 60 50 40 T6.9,34.6 30 20 10 M(49.24.9 Q-40 0(3.5,17 20 10 20 quantity of workers

The Arizona Chronicle is deciding how to optimize its newspaper printing process to keep costs low. The provided figure illustrates the isoquants to print 10, 20, 30, and 40 newspapers. Given that each worker charges $120 for each day, while each printing press costs $24 to rent, the points represent the combinations of input that minimize costs. Based on the figure, at the cost-minimizing point, what is the average variable cost when producing 20 newspapers?

Answer Choices

A.) $59.28

B.) $48.67

C.) $63.22

D.) $72.48

Subject: Microeconomics

Answer 1

When 20 newspapers are produced, cost minimizing combination of inputs is 4.9 workers and 24.9 printing presses (Point M).

Cost of workers = 4.9 * 120 = $588

Cost of printing presses = 24.9 * 24 = $597.6

Total variable cost = $588 + $597.6 = $1,185.6

Output produced = 20 newspapers

Calculate the average variable cost -

AVC = TVC/Q = $1,185.6/20 = $59.28

The average variable cost when producing 20 newspapers is $59.28

Hence, the correct answer is the option (A).