(a)
Answer to Problem 14P
Fixed cost system I = 1.0.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Fixed cost refers to the cost of production that does not vary with the level of output. It is also known as the sunk cost.
Calculation:
Fixed cost can be found by looking at the intercept of the total cost function. Or by putting the value of x=0,
Fixed Cost of System I = 1.0
Conclusion:
Fixed Cost of System I = 1.0.
(b)
Fixed cost of System II.
Answer to Problem 14P
Fixed cost system II = 5.0.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Fixed cost refers to the cost of production that does not vary with the level of output. It is also known as the sunk cost.
Calculation:
Fixed cost can be found by look at the intercept of the total cost function. Or by putting the value of x = 0,
Fixed Cost of System II = 5.0.
Conclusion:
Fixed Cost of System II = 5.0.
(c)
Variable cost of System I.
Answer to Problem 14P
Variable cost of System I = 0.90.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Variable cost is the cost that varies with the level of output. It is given by the slope or the coefficient of the total cost function.
Calculation:
Variable cost is the cost that varies with the level of output. It is given by the slope or the coefficient of the total cost function.
Variable Cost of System I = 0.90x.
Conclusion:
Variable Cost of System I = 0.90x.
(d)
Variable cost of System II.
Answer to Problem 14P
Variable cost of System II = 0.10.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Variable cost is the cost that varies with the level of output. It is given by the slope or the coefficient of the total cost function.
Calculation:
Variable cost is the cost that varies with the level of output. It is given by the slope or the coefficient of the total cost function.
Variable Cost of System II = 0.10.
Conclusion:
Variable Cost of System II = 0.10.
(e)
Find the break-even point, where the costs are equal in both the systems.
Answer to Problem 14P
Break-even = 5000 maps dispensed per year.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Break-even point refers to the point where firm earns just zero economic profits. Here, it will be the point where total cost of system I is equal to the total cost of system II.
Calculation:
Break-even point is given by the intersection of the two cost
At break-even,
Total cost of System I = Total cost of System II
Conclusion:
Therefore, for 5 thousand maps dispensed per year the total annual cost of system I and II are equal.
(f)
To determine the range of output at which system I will be considered.
Answer to Problem 14P
Between (0-5000) maps dispensed per year, system I will be recommended.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
System I will be recommended for range of maps between 0-5000 per year. It is between these levels of output that the total cost line of system I is below the total cost line of system II.
Conclusion:
Thus between 0-5000 maps dispensed per year, system I will be less costly.
(g)
To determine the range of output at which system II will be considered.
Answer to Problem 14P
Between (5000-10,000) maps dispensed per year, system II will be recommended.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
System II will be recommended for range of maps between (5000-10,000) per year. It is between this level of output that the total cost line of system I is below the total cost line of system II.
ConclusionThus between (5000-10,000) maps dispensed per year, system II will be less costly.
(h)
Find the average and marginal cost when 3000 maps are dispensed per year.
Answer to Problem 14P
Average cost of System I = 0.0903
Average cost of System II = 0.1016
Marginal cost of system I = 0.90
Marginal cost of system II = 0.10.
Explanation of Solution
Given information:
Total Cost of System I =
Total Cost of System II =
Average cost is also known as the per-unit cost. It can be calculated by dividing total cost by the number of units produced.
Marginal cost is the change in total cost when one more unit of an output is produced. Here.
Calculation:
At 3000 maps dispensed per year,
Total Cost of System I is termed as TC I
Total Cost of System II is termed as TC II
Average Cost of System I is termed as AC I
Average Cost of System II is termed as AC II
Marginal cost is the change in total cost when one more unit of an output is produced. Here, as output increases by 1 units total cost increases by 0.90 for system I and by 0.10 for system II. So, marginal cost for the two systems will be,
Marginal cost of System I is termed as MC I
Marginal cost of System II is termed as MC II
Conclusion:
Average cost of System I = 0.0903
Average cost of System II = 0.1016
Marginal cost of system I = 0.90
Marginal cost of system II = 0.10.
Want to see more full solutions like this?
Chapter 2 Solutions
ENGINEERING ECO ANALYSIS W/STUDY GUIDE
- Assume that an economy has an inflationary gap. Compare the use of fiscal policy with the use of monetary policy to remove the gap. Assume a closed economy. Use graphs to illustrate.arrow_forwardSuppose Person A is looking for a health insurance plan on Oregon's health insurance marketplace and they find one with the following details: Monthly Premium: $331 Deductible: $5,000 Primary care visit to treat injury or illness: $35 copay Imaging (CT/PET Scans MRIs): 40% coinsurance after deductible Ambulance: 40% coinsurance after deductible Inpatient hospital stay: 40% coinsurance after deductible Suppose further that Person A purchases this plan and it takes effect in January 2022. The cost Person A pays per month for this health insurance is equal to _. Person A must pay. before coinsurance kicks in. 0000 $35; $5,000 $35; $331 $331; $5,000 $331; $35 Multiple Choice 1 point Suppose Person A is looking for a health insurance plan on Oregon's health insurance marketplace and you find one with the following details: Monthly Premium: $331 Deductible: $5,000 Primary care visit to treat injury or illness: $35 copay Imaging (CT/PET Scans MRIs): 40% coinsurance after deductible Ambulance:…arrow_forwardUse the figure below to answer the following question. Point X and Y represent two non-ideal contracts that the individual is faced with buying. From this information, you can conclude that if given the option between points B and Y the individual would prefer: Utility A у в 0000 UKI) E[Bp IH point B- the actuarially fair and full contract point Y-the actuarially unfair but full contract point Y- the actuarially fair, but partial contract point B- the actuarially fair, but partial contract incomearrow_forward
- 2. Another issue facing millennials is the growing income and wealth inequality. We will use our model to understand the implications of this issue. A. Begin from the baseline preferences and endowments. Assume Xavier is wealthier than Yuri. Xavier has an endowment of 1100 pounds for each period (E1=E2=1100). Yuri has an endowment of only 900 pounds in each period (E1=E2=900). Note that each period's market supply is unchanged (1100 + 900 = 1000 + 1000 = = 2000). Determine the equilibrium interest rate. r = % B. Begin from the baseline preferences and endowments. Assume Yuri is wealthier than Xavier. Xavier has an endowment of only 900 pounds in each period (E1=E2=900). Yuri has an endowment of 1100 pounds for each period (E1=E2=1100). Note that each period's market supply is unchanged (1100 + 900 = 1000 + 1000 = 2000). Determine the equilibrium interest rate. r = % C. Begin from the baseline preferences and endowments. A third person named Zena joins our economy. Zena is very…arrow_forwardUse the figure below to answer the following question. Let I represent Income when health, let Is represent income when ill. Let E[I] represent expected income. Point D represents Utility 100000 B у いいつ income есва Ін Is the expected utility from income with no insurance an actuarially fair and partial contract an actuarially fair and full contract an actuarially unfair and full contract an actuarially unfair and partial contractarrow_forwardOutline the principles of opportunity cost and comparative advantage. Describe how these principles can be applied to address the scarcity of resources in a real-world scenario involving a company or industry.arrow_forward
- Not use ai pleasearrow_forward3. Consider the case of everyone being wealthier in the future, such as from a positive productivity shock (computers, internet, robotics, AI). A. Begin from the baseline preferences and endowments. Give both people an endowment of 1000 pounds for the first period and 1100 pounds for the second. AI increases the supply of second period goods by 10%. Note that there is now a total of 2000 pounds in the first period and 2200 pounds in the second. Determine the equilibrium interest rate. r = % B. Begin from the baseline preferences and endowments. Give both people an endowment of 1100 pounds for the first and 1100 pounds for the second periods. AI increases the supply in all periods by 10%. Note that there are now 2200 pounds in the first period and 2200 pounds in the second. Determine the equilibrium interest rate. r = % C. Explain how productivity and the real rate are connected. Write at least five sentences.arrow_forwardNot use ai pleasearrow_forward
- Not use ai pleasearrow_forwardNot use ai pleasearrow_forwardJim's Bank Account for the Year to 30 April 2008: We will start by calculating the balance of the business bank account, using the transactions provided. Opening Balance: Jim initially deposited €150,000 into his business bank account on 1 May 2007. Transactions: Receipts: Cash Sales (May 2007 to April 2008): €96,000 Credit Sales (Business customers): €19,600 (Note: This amount is not yet received as it is on credit, but it will be included in the Income Statement and not the bank balance at this stage.) Bank receipts from credit customers (amount owed at 30 April 2008): €6,800 Total Receipts:€96,000 (Cash Sales) + €6,800 (credit customer payments) = €102,800 Payments/Expenditures: Lease Payment (Paid in advance for five years): €50,000 Shop Fitting: €10,000 Assistant’s Wages: €250 per month × 12 months = €3,000 Telephone expenses: €800 Heat & Light expenses: €1,000 Jim’s withdrawals for personal expenditure: €1,000 × 12 months = €12,000 Accounting Fee (after the year-end):…arrow_forward
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education