03 Jun Question Chapter 9 6. We frequently hear the following terms used by businesspersons. What does each mean in economic terminology?
Question
Chapter 9
6. We frequently hear the following terms used by businesspersons. What does each mean in economic terminology?
A. spreading the overhead.
B. A break-even level of production
C. The efficiency of mass production.
7. The production engineers at Impact Industries have derived the expansion path shown in the following figure. The price of labor is $100 per unit.
There is a graph showing the expansion path and three curves at 120, 180, 240 output levels.The expansion path hits these lines at(120) 20 (C)(capital units) 4(L)(Labor units, (180) 40 (C) 6(L), (240) 50(C) 8(L). There are three straight lines in faded gray that run with these curves…(120) 40(C) to 8(L), (180) 60(C) to 12(L), (240) 90 (C) to 18 (L)…I hope this helps recreate the graph? Capital runs by 10’s to 100 on the left-vertically and Labor runs by 2’s to 20 horizontally
a) what price does Impact Imdustries pay for capital?
b) if the manager at Impact decides to produce 180 units of output, how much labor and capital should be used in order to minimize total cost?
c) what is the total cost of producing 120, 180, and 240 units of output in the long run?
d) Impact Industries originally built the plant (i.e. purchased the amount of capital) designed to produce 180 units optimally. In the short run with capital fixed, if the manager decides to expand production to 240 units, what is the amount of labor and capital that will be used? (hint: how much the firm expand output in the short run when capital is fixed?
e) Given your answer to part d, calculate average variable, average fixed, and average total cost in the short run?
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