Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is: C(q, K) = 15
+ 200K, where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is:
C_LR (q) = 173.5578q^10/7. At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Question

Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is: C(q, K) = 15

+ 200K, where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is:
C_LR (q) = 173.5578q^10/7. At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Quizplus · Accepted Answer

The Answer of Homer's boat manufacturing plant leases 50 hydraulic lifts and produces 25 boats per period. Homer's short-run cost function is: C(q, K) = 15 + 200K, where q is the number of boats produced and K is the number of hydraulic lifts. Homer's long-run cost function is: C_LR (q) = 173.5578q^10/7. At Homer's current short-run plant size, calculate Homer's short-run average total cost of production. If Homer would lease 11 more hydraulic lifts in the short run, will his short-run average total cost of producing 25 boats increase or decrease? Does Homer's long-run cost function exhibit increasing, constant, or decreasing returns to scale?

Homer's Boat Manufacturing Plant Leases 50 Hydraulic Lifts and Produces