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: Cengage Learning
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Question
Chapter 8, Problem 9E
To determine
To find:Estimated cost of 200th unit of output and percentage of learning at E.
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Students have asked these similar questions
The cost function of a large railroad
corporation is Y=10^7+T, where Y is the
total cost of shipping in U.S. dollars and T is
the tons shipped. Last year the company
charged on average 90 cent for each ton of
freight. Their annual shipments totaled 50
million tons. This year they are considering
geographical expansion through the
purchase of a smaller railroad corporation
that last year shipped a total of 22 million
tons. Economists estimated that the total
cost function (for the merged corporations)
will be Y=20^7+0.1T, while 10% more
freight should be expected due to the
better geographic coverage, at a price
discounted by 10 cents. a) Which railroad
realizes greater EOS? Use a numerical
example or a graphic for proof. b) Show
numerically that the large railroad should
merge with the smaller one (calculate cost
vs. revenue).
A study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function: (Source:
Johnston, "Chapter 4," in Statistical Cost Analysis)
AVC = 1.24 + 0.0033Q + 0.00000290²
Q
= output; measured in millions of kWh per year
Z = plant size; measured in thousands of kilowatts
where AVC = average variable cost (i.e., working costs of generation), measured in pence per kilowatt-hour (kWh). (A pence was a British monetary
unit equal, at that time, to 2 cents U.S.)
What is the long-run total variable cost function for electricity generation?
1.24 +0.0033 +0.0000029Q -0.000046Z 0.026Z 0.000182²
Q
Q
Q
○ 0.0033 +20.0000029Q -0.000046 Z
O 0.0033Q +20.00000290² - 0.000046 QZ
O 1.24Q +0.0033Q² +0.0000029Q³ – 0.000046Q²Z – 0.026ZQ+0.00018Z²Q
What is the long-run marginal cost function for electricity generation?
0.000046 QZ
O 0.0033Q +20.0000029Q² +0.000046 QZ
O 1.24 +0.0066Q+0.0000087Q² - 0.000092QZ – 0.026Z+0.00018Z2
O +0.0033…
A company makes solar panels. The company's revenue function, in dollars, is R(n)= 10n , where n is
the number of panels produced. The cost function is C(n) = 100(2)30 . R and C are shown on the graph
below.
1000
800
600
400
200
20 40 60 80 100 1
Number of Panels
a) Estimate from the graph
i) the break-even points
e) How would your answers for break-even points and maximum profit change if
i) the number of dollars of revenue per panel is increased slightly?
ii) the cost function is changed to C(n)=100(2)35 ?
f) What does the number that was changed in part e) ii) represent?
Dollars
Chapter 8 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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Similar questions
- The total cost C for a manufacturer during a given time period is a function of the number N of items produced during that period. To determine a formula for the total cost, we need to know two things. The first is the manufacturer's fixed costs. This amount covers expenses such as plant maintenance and insurance, and it is the same no matter how many items are produced. The second thing we need to know is the cost for each unit produced, which is called the variable cost. Suppose that a manufacturer of widgets has fixed costs of $1000 per month and that the variable cost is $20 per widget (so it costs $20 to produce 1 widget). (a) Explain why the function giving the total monthly cost C, in dollars, of this widget manufacturer in terms of the number N of widgets produced in a month is linear. C always increases by $20 when N increases by Therefore, C has a constant rate of change and so is a linear function of N. Identify the slope and initial value of this function. slope initial…arrow_forwardThe total cost C for a manufacturer during a given time period is a function of the number N of items produced during that period. To determine a formula for the total cost, we need to know two things. The first is the manufacturer's fixed costs. This amount covers expenses such as plant maintenance and insurance, and it is the same no matter how many items are produced. The second thing we need to know is the cost for each unit produced, which is called the variable cost.Suppose that a manufacturer of widgets has fixed costs of $1000 per month and that the variable cost is $20 per widget (so it costs $20 to produce 1 widget). Explain why the function giving the total monthly cost C, in dollars, of this widget manufacturer in terms of the number N of widgets produced in a month is linear. C always increases by $20 when N increases by ______. Therefore, C has a constant rate of change and so is a linear function of N. Identify the slope and initial value of this function. slope…arrow_forwardThe cost formula for a company can be modeled by C=1092+40x+0.1x2C=1092+40x+0.1x2 where xx represents the number of items made. A formula for the company's income is modeled with R=108x−0.9x2R=108x-0.9x2, where xx is the number of items sold. A company will break even when its costs equal its income. How many items must a company make and then sell to break even? Answer: (If there are multiple answers, separate the answers with a comma.)arrow_forward
- A small business woman has realized that for one of her products, if the price per unit is GH¢20 she can sell 300 units a day. On the other hand, if the price per unit is reduced to GH¢13, she can sell 440 units a day. From the accounting records, her accountant has estimated the fixed cost of production as GH₵2,000 with a variable cost per unit of GH¢10. (i). Find an expression relating price and output assuming it is linear. (ii). State the total cost function, assuming it is linear. (iii) Advise the business woman on the level of production at which she will breakeven.arrow_forwardA firm's average cost (AC) per unit of output depends on the number of hours of skilled labor (S) and the number of hours of unskilled labour (U) employed in the production process. The firm's AC function is defined below. Determine the quantities of the two inputs that will result in production at the lowest possible average cost and determine the associated minimum average cost. AC = 3S2 + 2U2 - 2SU - 2S - 6U + 20arrow_forwardThe Precision Machine Tool Manufacturing Company has the following total costfunction: C=Q3 -8Q2 + 25Q Find the AC and MC functions and show that at the minimum point of AC, MC = AC.arrow_forward
- a) A manufacturer's marginal cost (MC) function is given by: 1000 МС — 3Q+12 Find the equation of the total cost function if total costs are 5200 when Q = 8.arrow_forwardWhat is the estimate of the cumulative average hours per unit required to produce the 5th unit of a production run that has an 70% learning curve, if the first unit takes 53 hours? (Write your answer at least two decimal point and without unit)arrow_forwardA firm manufactures a commodity at two different factories, Factory X and Factory Y. The total cost (in dollars) of manufacturing depends on the quantities, x and y produced at each factory, respectively, and is expressed by the joint cost function: C(x, y) 1x? + xy + 8y² + 700 A) If the company's objective is to produce 1,800 units per month while minimizing the total monthly cost of production, how many units should be produced at each factory? (Round your answer to whole units, i.e, no decimal places.) To minimize costs, the company should produce: at Factory X and at Factory Y B) For this combination of units, their minimal costs will be dollars. (Do not enter any commas in your answer.)arrow_forward
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