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21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?

21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
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21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?
Transcribed Image Text:21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?
21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?
Transcribed Image Text:21. An oil transmission company uses only two inputs, pipelines and workers. Its output is the volume of oil transmitted (V), which is determined by the area of the cross section (3.14r2) and the length of pipeline (h). Thus, V = 3.14r¹h, where r is radius of the pipeline and h is the total length of the pipeline. The cost of building the pipeline depends on the surface area of the pipeline S, where S = 6.28th, which costs $100 per S. Besides, cost of hiring labour for managing the pipeline depends on the length of the pipeline, which costs $10 per h. A standard pipeline radius r is 0.5 metre. (a) If both r and h double, output (V) will increase by how much? (b) If both r and h double, total cost (C) will increase by how much? (c) Based on (a) and (b), are there economies of scale?
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