Ruby invents a new type of pillow and obtains a patent for it. Sleep-Time Inc. believes that Ruby’s pillow infringes on one of S
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Answer:
Explanation:
Assume the <em>cost</em> equation to be:
Where is the number of units (wooden baseball bats) produced.
The <em>average cost per unit of production level</em> is the total cost divided by the number of units produced:
You are given that the <em>average cost per unit of a production level of 7,700 bats is $14</em>, then:
You are also given that the <em>fixed costs</em> are <em>$22,500</em>, thus A = 22,500. Hence, you can substitute the value of A in the previous equation and find B:
Now you can complete the cost equation:
And to predict the total costs for 8,600 bats you must subsitute x with 8,600 in the previous equation:
Answer: Minimum efficient scale is 8 units.
Explanation:
Given that,
Cost function: C(q) = 64 +
Marginal cost function: MC = 2q
Average cost: AC =
=
=
The minimum efficient scale is at a point where MC = AC
2q =
Therefore, minimum efficient scale is 8 units.