Question

Long-Run Cost (Study Plan 11.4) Use the following data to work Problems 12 to 14. Alejandro's Bus Rides rents buses at Mex$600 per bus per day and pays Mex$70 per day for each driver it hires. The table shows the firm's production function. Output (rides per day) Labor (workers per week) Bus Bus Bus Bus Station 1 Station 2 Station 3 Station 4 30 75 15 50 65 25 50 70 85 95 35 75 85 100 110 45 85 95 110 120 Buses 10 20 30 40 12. Graph the ATC curves for Bus Station 1 and Bus Station 2. Explain why these ATC curves differ 13. Graph the ATC curves for Bus Station 3 and Bus Station 4. Explain why these ATC curves differ On Alejandro's LRAC curve, what is the average cost of producing 50, 85, and 95 rides a week? b. What is Alejandro's minimum efficient scale? What was happening before this point? 14. a. c. At which point does Alejandro's production function feature diseconomies of scale? What is its implication?

Answer 1

data Given Rider ents buses at Mez Bus Ale jancho's 600 py us pe ay 70 pe day Mex Bur Station-4 Lab TFC TC X600 (nantal Pe do bus) ATC 235 10 50 6,000 ,o 50 30 15 155 7750 750 50 25 6,000 S,4 50 t2 Q4-50 35 15 6 000 6,000 31150 45 85 '801 habetr

Bus Staton 2 20( buse) TFC Tve lab X6co (nental ATC TC Labon Pe lous) 15 50 13/050 261 1,050 25 10 750 13,150 12r000 12 000 35 110 2/450 1414 S0 12/000 45 160 95 Curves Both ATC are economics of Scale ndicaing that theYe bus es above that of bus Station ATC fox been has increase there an Station 4 aus labor While fned Captal the Same The nemans Component 96

Bus Station -3 TFC30 TVC lab* Clouses) 600 nental pel bus) TC ATC 5 6 5 187 000 1050 19050 293 19,750 t000 232 150 100 I8,O00 201450 35 205 3IIS0 10 192 Labor