uppose that you are the manager of a company that vaccinates human beings for biological diseases. Your company uses two inputs to produce vaccinations: physicians and laboratories.  However, this is a short-run analysis where physicians are variable but laboratories are fixed.  Suppose that each physician costs $500 per day (for an annual salary of about $175,000) and the daily cost for the laboratory is $1,500 (for rental cost of about $547,500 per year).  In the short run, your company has 1 laboratory.  The following table presents potential daily production levels with requisite input combinations.  Physicians Laboratories Vaccinations (Q) TC TFC TVC MC ATC AFC AVC 0 1 0 1500  1500  0  -  -  -  -  3 1 1 3000  1500  1500  1500  3000  1500  1500  5 1 2 4000  1500 2500 1000 2000 750 1250 6 1 3  4500  1500 3000 500 1500 500 1000 9 1 4 6000  1500 4500 1500  1500 375  1125  15 1 5  9000 1500 7500 3000 1800 300 1500 24 1 6  13500 1500 12000 4500 2250 250 2000 36 1 7  19500 1500 18000 6000 2785.71 214.28 2571.43 51 1 8 27000  1500 25500 7500 3375 187.5 3187.5 Suppose the industry for vaccinating humans is perfectly competitive, and that all companies have production functions and cost functions that are identical to yours.  Also, assume that the market price for a vaccination against biological diseases is $6,500.    How much output should your company produce per day in the short run to maximize profits? At this output level, how many physicians do you hire?

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CAN YOU ANSWER QUESTIONS 1 & 2 FOR ME?

Suppose that you are the manager of a company that vaccinates human beings for biological diseases. Your company uses two inputs to produce vaccinations: physicians and laboratories.  However, this is a short-run analysis where physicians are variable but laboratories are fixed.  Suppose that each physician costs $500 per day (for an annual salary of about $175,000) and the daily cost for the laboratory is $1,500 (for rental cost of about $547,500 per year).  In the short run, your company has 1 laboratory.  The following table presents potential daily production levels with requisite input combinations. 

Physicians

Laboratories

Vaccinations (Q)

TC

TFC

TVC

MC

ATC

AFC

AVC

0

1

0

1500 

1500 

3

1

1

3000 

1500 

1500 

1500 

3000 

1500 

1500 

5

1

2

4000 

1500

2500

1000

2000

750

1250

6

1

3

 4500

 1500

3000

500

1500

500

1000

9

1

4

6000 

1500

4500

1500

 1500

375 

1125 

15

1

5

 9000

1500

7500

3000

1800

300

1500

24

1

6

 13500

1500

12000

4500

2250

250

2000

36

1

7

 19500

1500

18000

6000

2785.71

214.28

2571.43

51

1

8

27000 

1500

25500

7500

3375

187.5

3187.5

Suppose the industry for vaccinating humans is perfectly competitive, and that all companies have production functions and cost functions that are identical to yours.  Also, assume that the market price for a vaccination against biological diseases is $6,500. 

 

  1. How much output should your company produce per day in the short run to maximize profits?
  2. At this output level, how many physicians do you hire?
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