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What will the long-run total cost and long-run average cost

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Reference no: EM131421751

1. What is total fixed cost?
a. 80
b. 40
c. 20
d. Cannot be determined
e. None of the above

2. What is total cost when Q=1?
a. 80
b. 35
c. 40
d. 20
e. None of the above

3. What is average total cost when Q=2?
a. 35
b. 40
c. 55
d. 110
e. None of the above

4. What is marginal cost when Q=3?
a. 30
b. 10
c. 15
d. 130
e. None of the above

5. What is marginal cost when Q=4?
a. 26
b. 10
c. 13.33
d. 8.67
e. 156

The production engineers at Impact Industries have derived the optimal combinations of labor and capital. These are the only two inputs used by Impact. The following chart shows the combinations of labor and capital for three levels of output.

Q is the output level. L* is the optimal amount of labor. K* is the optimal amount of capital. The price of labor is $100 per unit. The price of capital is $20 per unit.

Q

L*

K*

120

5

20

180

7

7

240

12

24

6. If the manager of Impact Industries decides to produce 120 units, what will the long-run total cost and long-run average cost of producing 120 units? Show all calculations.

7. If the manager of Impact Industries decides to produce 180 units, what will the long-run total cost and long-run average cost of producing 180 units? Show all calculations.

8. If the manager of Impact Industries decides to produce 240 units, what will the long-run total cost and long-run average cost of producing 240 units? Show all calculations.

9. Are there economies of scale over the output range 120 to 180? Explain in 45-50 words.

10. Are there diseconomies of scale over the output range 180 to 240? Explain in 45-50 words.

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The first part of assignment was based on how to calculate various costs or various components of costs for example: total fixed cost, total variable cost, average fixed cost, average variable cost, marginal cost. In the second part of the assignment we have to calculate costs over different range of output and have to ascertain whether there are economies of scale or dis-economies of scale over these output ranges.

Reference no: EM131421751

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Fill in the blanks in the following spreadsheet showing the short-run costs for a firm. Use the completed spreadsheet to answer multiple choice questions 1-5. You may either fill in this spreadsheet or place your spreadsheet in the Drop Box.

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