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 com- puters), is given by AC = 10 - 0.1Q + 0.3q a. Is there a learning-curve effect? 5. Are there economies or diseconomies of scale? 2. 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.

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 com- puters), is given by AC = 10 - 0.1Q + 0.3q a. Is there a learning-curve effect? 5. Are there economies or diseconomies of scale? 2. 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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