WORLD VIEW Tesla Starts Rolling Out Cars from Shanghai Gigafactory Elon Musk gambled a fortune in Reno, Nevada when he built a "gigafactory" to build lithium batteries for Tesla electric vehicles. Together with battery-maker Panasonic, he invested $4.5 billion in the factory. When fully completed, the Reno facility will be the largest factory in the world, capable of producing enough battery packs for 500,000 cars a year. Musk says the sheer scale of the factory will enable Tesla to bring down the cost of battery packs by as much as 30 percent, the most expensive component of electric vehicles. Musk has made the same bet again-this time in China. At a cost of $2 billion, Tesla has built another gigafactory in Shanghai and is already producing Model 3 vehicles. In 2020 Tesla hopes to build at least 35,000 cars, then ramp up to 500,000 cars annually in a few years. Given the success of the Reno plant, few investors want to bet against him. Source: Media reports of December 2019-January 2020. nstructions: Round your responses to the nearest whole number. . Calculate the average fixed cost at the Shanghai factory if the 2020 output level (= 35,000 cars annually) were maintained for 10 ears. $ . Calculate average fixed cost if Tesla ramps up output to 500,000 cars a year for 10 years. $
WORLD VIEW Tesla Starts Rolling Out Cars from Shanghai Gigafactory Elon Musk gambled a fortune in Reno, Nevada when he built a "gigafactory" to build lithium batteries for Tesla electric vehicles. Together with battery-maker Panasonic, he invested $4.5 billion in the factory. When fully completed, the Reno facility will be the largest factory in the world, capable of producing enough battery packs for 500,000 cars a year. Musk says the sheer scale of the factory will enable Tesla to bring down the cost of battery packs by as much as 30 percent, the most expensive component of electric vehicles. Musk has made the same bet again-this time in China. At a cost of $2 billion, Tesla has built another gigafactory in Shanghai and is already producing Model 3 vehicles. In 2020 Tesla hopes to build at least 35,000 cars, then ramp up to 500,000 cars annually in a few years. Given the success of the Reno plant, few investors want to bet against him. Source: Media reports of December 2019-January 2020. nstructions: Round your responses to the nearest whole number. . Calculate the average fixed cost at the Shanghai factory if the 2020 output level (= 35,000 cars annually) were maintained for 10 ears. $ . Calculate average fixed cost if Tesla ramps up output to 500,000 cars a year for 10 years. $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:WORLD VIEW
Tesla Starts Rolling Out Cars from Shanghai Gigafactory
Elon Musk gambled a fortune in Reno, Nevada when he built a "gigafactory" to build
lithium batteries for Tesla electric vehicles. Together with battery-maker Panasonic, he
invested $4.5 billion in the factory. When fully completed, the Reno facility will be the
largest factory in the world, capable of producing enough battery packs for 500,000
cars a year. Musk says the sheer scale of the factory will enable Tesla to bring down
the cost of battery packs by as much as 30 percent, the most expensive component of
electric vehicles.
Musk has made the same bet again-this time in China. At a cost of $2 billion, Tesla
has built another gigafactory in Shanghai and is already producing Model 3 vehicles.
In 2020 Tesla hopes to build at least 35,000 cars, then ramp up to 500,000 cars
annually in a few years. Given the success of the Reno plant, few investors want to
bet against him.
Source: Media reports of December 2019-January 2020.
Instructions: Round your responses to the nearest whole number.
a. Calculate the average fixed cost at the Shanghai factory if the 2020 output level (= 35,000 cars annually) were maintained for 10
years.
b. Calculate average fixed cost if Tesla ramps up output to 500,000 cars a year for 10 years.
c. If this higher level of output was attained, average fixed cost would decline by
percent.
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