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
icon
Related questions
Question
Question 4
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)
Quantity of Mixers
Fixed Cost (RM)
15 orders
30 orders
45 orders
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.
Transcribed Image Text:Question 4 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) Quantity of Mixers Fixed Cost (RM) 15 orders 30 orders 45 orders 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.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Medical Costs
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education