ABCD Inc. is a shoe company, they have decided to build a new manufacturing facility because they have developed modern technology to help in the production of their sneakers. The new facility will be able to process up to 10,000 pairs of sneakers per year, but this year is only expected to produce 7,000 pairs. ABCD Inc.'s first facility uses the same technology and has processed 12,000 shoes per year with a full production capacity of 12,000. Draw the long run and short-run average cost curve for ABCD’s new facility and first facility and indicate where the MES is most likely to occur.

ABCD Inc. is a shoe company, they have decided to build a new manufacturing facility because they have developed modern technology to help in the production of their sneakers. The new facility will be able to process up to 10,000 pairs of sneakers per year, but this year is only expected to produce 7,000 pairs. ABCD Inc.'s first facility uses the same technology and has processed 12,000 shoes per year with a full production capacity of 12,000. Draw the long run and short-run average cost curve for ABCD’s new facility and first facility and indicate where the MES is most likely to occur.

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

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 2E

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