Q1: A firm can produce its output in the long run using one of four different...

Transcribed Image Text:

Q1: A firm can produce its output in the long run using one of four different plant sizes. This is analogous to cutting grass using one of four types of equipment: hand clippers, a weed trimmer, a lawn mower or a riding lawn mower. The firm's short-run total costs (TC) for each of the four plant sizes is shown in the following table. For example, if the firm uses plant 1 to produce 12 units of output, its total cost is $1,512. a) Complete the following table by filling in the rows for short- run average total cost (ATC) of each plant size and long-run average total cost (LATC). Note: If you know how to use Microsoft Excel, you can download Assignment #18 Excel File found in Brightspace to do your calculations. Output (units) 1 2 3 4 5 6 7 8 9 10 11 12 TC (Plant 1) $118 $162 $198 $248 $305 $378 $462 $568 $702 $900 $1,166 $1,512 $134 $188 $237 $272 $300 $342 $392 $472 $576 $710 $880 $1,104 TC (Plant 2) TC (Plant 3) TC (Plant 4) $164 $244 $294 $328 $355 $372 $385 $400 $468 $560 $660 $816 $182 $280 $330 $372 $400 $420 $441 $464 $504 $550 $627 $732 ATC (Plant 1) ATC (Plant 2) ATC (Plant 3) ATC (Plant 4) LATC b) Which of the four plant sizes is associated with the largest plant size for the firm? c) Which plant size would the firm choose to produce 6 units of output? d) In which range of output, does this firm experience increasing returns to scale? e) At what level of output, is the firm's minimum efficient scale? f) In which range of output, does this firm experience decreasing returns to scale? Q1: A firm can produce its output in the long run using one of four different plant sizes. This is analogous to cutting grass using one of four types of equipment: hand clippers, a weed trimmer, a lawn mower or a riding lawn mower. The firm's short-run total costs (TC) for each of the four plant sizes is shown in the following table. For example, if the firm uses plant 1 to produce 12 units of output, its total cost is $1,512. a) Complete the following table by filling in the rows for short- run average total cost (ATC) of each plant size and long-run average total cost (LATC). Note: If you know how to use Microsoft Excel, you can download Assignment #18 Excel File found in Brightspace to do your calculations. Output (units) 1 2 3 4 5 6 7 8 9 10 11 12 TC (Plant 1) $118 $162 $198 $248 $305 $378 $462 $568 $702 $900 $1,166 $1,512 $134 $188 $237 $272 $300 $342 $392 $472 $576 $710 $880 $1,104 TC (Plant 2) TC (Plant 3) TC (Plant 4) $164 $244 $294 $328 $355 $372 $385 $400 $468 $560 $660 $816 $182 $280 $330 $372 $400 $420 $441 $464 $504 $550 $627 $732 ATC (Plant 1) ATC (Plant 2) ATC (Plant 3) ATC (Plant 4) LATC b) Which of the four plant sizes is associated with the largest plant size for the firm? c) Which plant size would the firm choose to produce 6 units of output? d) In which range of output, does this firm experience increasing returns to scale? e) At what level of output, is the firm's minimum efficient scale? f) In which range of output, does this firm experience decreasing returns to scale?

Answer rating: 100% (QA)

a ATCplant 1126 ATCplant 292 ATCp... View the full answer