Economics

2.) What is the ‘relevant range’ for the cost structure? In other words, at what volume might you expect the fixed and variable costs to change appreciably?

Best operating level is the volume of output at which average unit cost is minimized.

As Tesco continue to grow, they increase the size of their orders for raw materials. This results in the cost of each individual component purchased will fall. This will therefore reduce the average cost of production.

A corporate business enterprise is established under a specific legal framework where laws governing the operations and functioning of the enterprise are outlined. The activities of the enterprise are monitored and therefore such an enterprise is recognized by law. This is important due to the fact that legal suits can be filed by the enterprise within the provisions of the law.

The Law of diminishing returns states that if one factor of production is increased while the others remain constant, the overall returns will relatively decrease after a certain point. The total fixed cost is the same regardless of the output; the total variable costs will change with the level of output resulting in the total cost as the sum of the fixed cost and variable cost at each level of output. Over the 0 to 4 range of output, the TVC and TC curves slope upward. They reflect a decreasing rate due to the increasing minor returns. The slopes curves will increase due to these diminishing marginal returns.

Despite the city’s positive response to the coffee shop’s renovation, other businesses in the area have not followed suit in renovating the many decrepit buildings and abandoned lots. How might the presence of an externality be in part the cause of this?

* Calculated correctly—No. The correct calculation would equal what the material can be sold for at the current market value: 25,000 lbs x $9/per lb = $225,000

1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision?

average variable costs AVC = 2Q and average total costs ATC = 48/Q + 2Q. If market

| If variable costs increase, but price and fixed costs are held constant, the break even point will decrease.

This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 1 through 5. Answer each question clearly and concisely.

8. I would like to remove allocated costs and fixed overheads and see what would be the variable cost. If this is done, you can see that the variable cost hovers around 7 FF. ( Not many of you have done this)

Parts of opportunity cost are explicit costly (money spent along the project to make it happen, for the task to be done perfectly money and labor need to be involved, e.g. Boss paid workers for their project, students pay tuition to enroll in class and all other amenities involved.) and implicit cost (one’s time value or origin in the next best alternative. The time incorporated in order to run out the next best option).

In other words, variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of units produced).

The learning curve theory states that when many items are produced repetitively, the unit cost of those items decreases in a regular pattern as more units are produced. It should be used to estimate costs on projects involving the production of large quantities of items. It also applies to the amount of time it takes to complete some tasks.