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# Total cost and average total cost of producing 5000 units

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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.

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#### Solution Preview

a. Suppose the firm can produce 5000 units of output 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?

Total ...

#### Solution Summary

This solution is comprised of a detailed explanation to find the total cost and average total cost of producing the 5000 units of output.

\$2.19
See Also This Related BrainMass Solution

## Average total cost is determined.

1)If Redstone wanted to minimize average total cost, it would produce how many units?

2). If Redstone wishes to maximize profit MARGIN, it should produce how many units.

3) What level of output should the manager of Redstone choose to produce? Explain briefly

4. Now triple the fixed costs to 15,000 in your spreadsheet. How does this change your answer to question 4. Explain briefly

5). Suppose that Nancy Pelosi declares that clay fire pits are causing global warming, and demand for fire pits shrinks substantially in the U.S. (especially in California). Fire pit prices fall worldwide to \$65. Now, the manager of Redstone should produce how many units? Explain your answer

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