Total cost and average total cost of producing 5000 units
Answer the following questions on the basis of this
information for a single firm: total Cost of capital = $1000; price paid for
labor = $12 per labor unit; price paid for raw materials = $4 per raw-material
unit.
a. Suppose the firm can produce 5000 units of out put by
combining its fixed capital with 100 units of labor and 450 units of raw
materials. What are the total cost and average total cost of producing the 5000
units of output?
b. Now assume the firm improves its production process so
that it can produce 6000 units of out put by combining its fixed capital with
100 units of labor and 450 units of raw materials. What are the total cost and
average cost of producing the 6000 units of output?
c. Refer to your answers to Ba and 8 and explain how process
innovation can improve economic efficiency.
