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Answer:
A: for 500: 66; for 60: 68.9; for 100: 66
B: no
Step-by-step explanation:
We assume your average cost function is ...
A. The overline over the C indicates it is an average value.
Evaluating the cost function at the different production levels, we find the average cost per unit to be ...
<u>500 units</u>
c = ((0.01·500)+60)500 +500)/500 = 65 +1 = 66
<u>60 units</u>
c = ((0.01·60 +60)·60 +500)/60 = 60.6 +500/60 ≈ 68.93
<u>100 units</u>
c = ((0.01·100 +60)·100 +500)/100 = 61 +5 = 66
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B. Dividing out the fraction, we find that the cost per unit is ...
0.01x +60 +500/x
As x gets large, this approaches the linear function c = 0.01x +60. This <em>increases</em> as the number of units produced rises. (The minimum average cost is at a production level of about 224 units.)
