Homework Help is Here – Start Your Trial Now!
Business
Economics
REVIEW AND PRACTICE EXERCISES #3.1. DRAM FACTORY. You own and operate a facility located in Taiwan that manufac tures 6-4-megabit dynamic random-access memory chips (DRAMS) for personal comput ers (PCS). One year ago you acquired the land for this facility for $2 million, and used 83 million of your own money to finance the plant and equipment needed for DRAM manufacturing. Your facility has a maximum capacity of 10 million chips per year. Your cost of funds is 10% per year for either borrowing and investing. You could sell the land, plant, and equipment today for $8 million; you estimate that the land, plant, and equip ment will gain 6% in value over the coming year. (Use a one-year planning horizon for this problem.) In addition to the cost of land, plant, and equipment, you incur various operating expenses associated with DRAM production, such as energy, labor, raw materials, and packaging. Experience shows that these costs are $4 per chip, regardless of the number of chips produced during the year. In addition, producing DRAMs will cause you to incur fixed costs of $500k per year for items such as security, legal, and utilities. a stations of a ho (a) What is your cost function, C(q), where q is the number of chips produced during the year? Assume now that you can sell as many chips as you make at the going market price per chip of p. (b) What is the minimum price, p, at which you would find it profitable to pro- duce DRAMS during the coming year?

REVIEW AND PRACTICE EXERCISES #3.1. DRAM FACTORY. You own and operate a facility located in Taiwan that manufac tures 6-4-megabit dynamic random-access memory chips (DRAMS) for personal comput ers (PCS). One year ago you acquired the land for this facility for $2 million, and used 83 million of your own money to finance the plant and equipment needed for DRAM manufacturing. Your facility has a maximum capacity of 10 million chips per year. Your cost of funds is 10% per year for either borrowing and investing. You could sell the land, plant, and equipment today for $8 million; you estimate that the land, plant, and equip ment will gain 6% in value over the coming year. (Use a one-year planning horizon for this problem.) In addition to the cost of land, plant, and equipment, you incur various operating expenses associated with DRAM production, such as energy, labor, raw materials, and packaging. Experience shows that these costs are $4 per chip, regardless of the number of chips produced during the year. In addition, producing DRAMs will cause you to incur fixed costs of $500k per year for items such as security, legal, and utilities. a stations of a ho (a) What is your cost function, C(q), where q is the number of chips produced during the year? Assume now that you can sell as many chips as you make at the going market price per chip of p. (b) What is the minimum price, p, at which you would find it profitable to pro- duce DRAMS during the coming year?

Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter7: Economies Of Scale And Scope
Section: Chapter Questions
Problem 5MC
See similar textbooks
icon
Related questions
Question
total factor productivity cost • average cost marginal cost supply function incre pricing marginal revenue elasticity rule margin Lerner index . markup agency theory raider specific asset hold-up problem tapered integration impediments to imitation franchising sustained competitive advantage ambiguity strategy culture field experiment history learning curve Gausal REVIEW AND PRACTICE EXERCISES 3.1. DRAM FACTORY. You own and operate a facility located in Taiwan that manufac tures 64-megabit dynamic random-access memory chips (DRAMS) for personal comput ers (PCS). One year ago you acquired the land for this facility for $2 million, and used 83 million of your own money to finance the plant and equipment needed for DRAM manufacturing. Your facility has a maximum capacity of 10 million chips per year. Your cost of funds is 10% per year for either borrowing and investing. You could sell the land, plant, and equipment today for $8 million; you estimate that the land, plant, and equip ment will gain 6% in value over the coming year. (Use a one-year planning horizon for this problem.) In addition to the cost of land, plant, and equipment, you incur various operating expenses associated with DRAM production, such as energy, labor, raw materials, and packaging. Experience shows that these costs are $4 per chip, regardless of the number of chips produced during the year. In addition, producing DRAMs will cause you to incur fixed costs of $500k per year for items such as security, legal, and utilities. (a) What is your cost function, C(q), where q is the number of chips produced during the year? dove at foval tugtuo ga Assume now that you can sell as many chips as you make at the going market price per chip of p. (b) What is the minimum price, p, at which you would find it profitable to pro- duce DRAMS during the coming year? contigi
Transcribed Image Text:total factor productivity cost • average cost marginal cost supply function incre pricing marginal revenue elasticity rule margin Lerner index . markup agency theory raider specific asset hold-up problem tapered integration impediments to imitation franchising sustained competitive advantage ambiguity strategy culture field experiment history learning curve Gausal REVIEW AND PRACTICE EXERCISES 3.1. DRAM FACTORY. You own and operate a facility located in Taiwan that manufac tures 64-megabit dynamic random-access memory chips (DRAMS) for personal comput ers (PCS). One year ago you acquired the land for this facility for $2 million, and used 83 million of your own money to finance the plant and equipment needed for DRAM manufacturing. Your facility has a maximum capacity of 10 million chips per year. Your cost of funds is 10% per year for either borrowing and investing. You could sell the land, plant, and equipment today for $8 million; you estimate that the land, plant, and equip ment will gain 6% in value over the coming year. (Use a one-year planning horizon for this problem.) In addition to the cost of land, plant, and equipment, you incur various operating expenses associated with DRAM production, such as energy, labor, raw materials, and packaging. Experience shows that these costs are $4 per chip, regardless of the number of chips produced during the year. In addition, producing DRAMs will cause you to incur fixed costs of $500k per year for items such as security, legal, and utilities. (a) What is your cost function, C(q), where q is the number of chips produced during the year? dove at foval tugtuo ga Assume now that you can sell as many chips as you make at the going market price per chip of p. (b) What is the minimum price, p, at which you would find it profitable to pro- duce DRAMS during the coming year? contigi
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Cost of Production
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
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
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS