Question 4

I need help urgently

Question 4 [20] Tech World (Pty) Ltd is a manufacturer of security equipment. One of its products is a closed-circuit television (CCTV) camera. Thaho is the production manager and he is very interested in managing the long-term cost of the company, because one of his key periormance areas is the long-term production planning for the company. Thaho read that long-term average cost is a key indicator of scale economies and that a finn's level of total output together with its associated long-run total cost determine the type of scale economies the firm is experiencing. Thabo compiled the following table but is unsure how to use the data in the table to determine the different categories of scale economies for the company. He asked for your assistance in this matter. Capacity Total product Long-run Long-run level total cost average cost A 15 000 56 500 3.77 B 25 000 80 600 3.22 C 40 000 120 000 3.00 D 55 000 140 000 2.55 E 70 000 168 650 2.41 F 95 000 210 000 2.21 G 120 000 265 200 2.21 H 145 000 320 450 2.21 I 160 000 390 750 2.44 J 185 000 490 340 2.65 K 210 000 590 640 2.81 Reguired: 4.1. Use the data provided in the table together with any other calculations you deem necessary in order to help Thaho to classify the capacity levels into the categories where Tech World will experience economies of scale, constant returns to scale and diseconomies of scale. Provide reasons for each of the classifications. (13) 4.2. Thabo also wants to know the range of outputs where the firm reaches the lowest feasible cost per unit. Identify for Thaho the minimum efficient scale and the maximum efficient scale output levels in the table. (7)