Will its average cost of production increase or decrease

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Reference no: EM131236675

A computer company’s cost function, which relates its average cost of production AC to its cumulative out- put in thousands of computers Q and its plant size in terms of thousands of computers produced per year q (within the production range of 10,000 to 50,000 computers), is given by AC = 10 - 0.1Q + 0.3q a. Is there a learning-curve effect? b. Are there economies or diseconomies of scale? c. During its existence, the firm has produced a total of 40,000 computers and is producing 10,000 com- puters this year. Next year it plans to increase pro- duction to 12,000 computers. Will its average cost of production increase or decrease? Explain.

Reference no: EM131236675

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