Graph the average and marginal cost curves for gumballs assuming v=3, w=5 Suppose that the Acme Gumball Company has a fixedproportions production function that requires it to usetwo gumball presses and one worker to produce 1,000gumballs per hour.a. Explain why the cost per hour of producing 1,000gumballs is 2v+ w (where v is the hourly rent forgumball presses and w is the hourly wage).b. Assume Acme can produce any number of gum-balls they want using this technology. Explainwhy the cost function in this case would beTC = q(2v + w), where q is output of gumballsper hour, measured in thousands of gumballs.c. What is the average and marginal cost of gumballproduction (again, measure output in thousands ofgumballs)?d. Graph the average and marginal cost curves forgumballs assuming v = 3, w =e. Now graph these curves for v = 6, w = 5. Explainwhy these curves have shifted.

Average cost AC is given by the ratio of total cost by the total quantity. Marginal cost is the…

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gumb d. Graph the average and marginal cost curves for gumballs assuming v = 3, w = 5.

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Chapter1: Making Economics Decisions

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Question

100%

Graph the average and marginal cost curves for gumballs assuming v=3, w=5

Suppose that the Acme Gumball Company has a fixed
proportions production function that requires it to use
two gumball presses and one worker to produce 1,000
gumballs per hour.
a. Explain why the cost per hour of producing 1,000
gumballs is 2v+ w (where v is the hourly rent for
gumball presses and w is the hourly wage).
b. Assume Acme can produce any number of gum-
balls they want using this technology. Explain
why the cost function in this case would be
TC = q(2v + w), where q is output of gumballs
per hour, measured in thousands of gumballs.
c. What is the average and marginal cost of gumball
production (again, measure output in thousands of
gumballs)?
d. Graph the average and marginal cost curves for
gumballs assuming v = 3, w =
e. Now graph these curves for v = 6, w = 5. Explain
why these curves have shifted.

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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