MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Question
Chapter 5, Problem 18PAA
To determine
To find: The optimal size and check in which economies ofscale it operates.
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Students have asked these similar questions
In the wake of the energy crisis in California in 2000 and 2001, many electricity generating facilities across the nation periodically reassess their projections of future demand and capacity for electricity in their respective markets. As a manager at Florida Power & Light Company, you are in charge of determining the optimal size of two electricity generating facilities. The accompanying figure illustrates the short-run average total cost curves associated with different facility sizes. Demand projections indicate that 6 million kilowatts must be produced at your South Florida facility and 2 million kilowatts must be produced at your facility in the Panhandle. Determine the optimal facility size (S, M, or L) for these two regions, and indicate whether there will be economies of scale, diseconomies of scale, or constant returns to scale if the facilities are built optimally.
Costs in the short run versus in the long run Scooter’s Scooters is a large American manufacturer of electric scooters operating out of Mesa. Currently, the company produces all of its scooters using a single manufacturing facility, its factory in town. Recently, management has been considering expanding operations to one or two additional factories. The following table presents the manufacturer’s monthly short-run average total cost (SRATC) for various levels of production if it operates out of one, two, or three factories. (Note: Q equals the total quantity of scooters produced by all factories.) Number of Factories Average Total Cost (Dollars per scooter) Q = 25 Q = 50 Q = 75 Q = 100 Q = 125 Q = 150 1 260 200 160 200 280 400 2 330 240 160 160 240 330 3 400 280 200 160 200 260 Suppose Scooter’s Scooters is currently producing 125 scooters per month in its only factory. Its short-run average total cost is $ per scooter. Suppose Scooter’s Scooters is expecting to produce 125 scooters…
Costs in the short run versus in the long run
Scooter’s Scooters is a large American manufacturer of electric scooters operating out of Detroit. Currently, the company produces all of its scooters using a single manufacturing facility, its factory in town. Recently, management has been considering expanding operations to one or two additional factories. The following table presents the manufacturer’s monthly short-run average total cost (SRATC) for various levels of production if it operates out of one, two, or three factories. (Note: Q equals the total quantity of scooters produced by all factories.)
Number of Factories
Average Total Cost
(Dollars per scooter)
Q = 100
Q = 200
Q = 300
Q = 400
Q = 500
Q = 600
1
360
200
160
240
400
720
2
540
300
160
160
300
540
3
720
400
240
160
200
360
Suppose Scooter’s Scooters is currently producing 100 scooters per month in its only factory. Its short-run average total cost is
per scooter.…
Chapter 5 Solutions
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Similar questions
- A local company is planning to manufacture and market a four-slice toaster. For this toaster, the research department’s estimates are aweekly demand of 300 toasters at a price of $25 per toaster and a weekly demand of 400 toasters at a price of $20. The financial department’s estimates are fixed weekly costs of$5,000 and variable costs of $5 per toaster. Assume that the cost function is linear. Use the financial department’s estimates to express the cost function interms of ?. Determinethe Marginal cost and interpret the results.arrow_forwardSuppose a management accountant of a manufacturing company give you the following information: At the selling price of OMR 1000 the quantity sold is 175 units per month. At the selling price of OMR 1800 the quantity sold is 125 units per month. - The variable cost per unit is OMR 920. - The fixed cost is OMR 24000. Required: i. From the above information, formulate the price function (P-a - bQ), and the cost function (C = a + bQ) of this company. ii. Using the functions which you formulated, determine the following: a. Profit maximizing quantity. b. Profit-maximizing price. c. Maximum profit value. d. Revenue-maximizing quantity.arrow_forward
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