Question 4Liza owns a small bakery company catering for gourmet cakes and pastries. Her fixed cost is the costof the mixer and baking tools, while variable costs include flour, sugar, eggs, and edible decorations.Contemplating business expansion, she is trying to decide how many commercial mixers to purchaseand came out with the following projections:Variable Cost (RM)Quantity of MixersFixed Cost (RM)15 orders30 orders45 orders6,0002,0005,00012,00037,0001,8003,80010,80048,0001,2003,6008,400b) What is Liza's long-run average total cost for 15 orders per week? Please explain why thisshort-run average total cost of producing 15 orders per week when the number of mixers isfixed at 3 is greater than her long-run total average cost of producing 15 orders per week.

Total cost is the summation of fixed cost and Variable cost . TC = FC +VC

Liza owns a small bakery company catering for gourmet cakes and pastries. Her fixed cost is the cost of the mixer and baking tools, while variable costs include flour, sugar, eggs, and edible decorations. Contemplating business expansion, she is trying to decide how many commercial mixers to purchase and came out with the following projections: Variable Cost (RM) 30 orders 45 orders Quantity of Mixers Fixed Cost (RM) 15 orders 2 6,000 2,000 5,000 12,000 3 7,000 1,800 3,800 10,800 4 8,000 1,200 3,600 8,400 b) What is Liza's long-run average total cost for 15 orders per week? Please explain why this short-run average total cost of producing 15 orders per week when the number of mixers is fixed at 3 is greater than her long-run total average cost of producing 15 orders per week.

Liza owns a small bakery company catering for gourmet cakes and pastries. Her fixed cost is the cost of the mixer and baking tools, while variable costs include flour, sugar, eggs, and edible decorations. Contemplating business expansion, she is trying to decide how many commercial mixers to purchase and came out with the following projections: Variable Cost (RM) 30 orders 45 orders Quantity of Mixers Fixed Cost (RM) 15 orders 2 6,000 2,000 5,000 12,000 3 7,000 1,800 3,800 10,800 4 8,000 1,200 3,600 8,400 b) What is Liza's long-run average total cost for 15 orders per week? Please explain why this short-run average total cost of producing 15 orders per week when the number of mixers is fixed at 3 is greater than her long-run total average cost of producing 15 orders per week.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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