Ronald's Outboard Motor Manufacturing plant has the following short-run cost function:
C(q, A, K) =
+ 500K, where q is the number of motors produced, K is the number of machines leased, and A is a productivity factor of technology. Currently, A is 25 and Ronald uses 20 machines. Ronald is investigating a new production technique. If he adopts the new technique, the productivity factor will become 36. If Ronald adopts the new technique, what is his average total cost of manufacturing 140 motors? Did the increase in the productivity factor increase or decrease the average total cost of producing 140 motors?

Question

Ronald's Outboard Motor Manufacturing plant has the following short-run cost function:
C(q, A, K) =  
+ 500K, where q is the number of motors produced, K is the number of machines leased, and A is a productivity factor of technology. Currently, A is 25 and Ronald uses 20 machines. Ronald is investigating a new production technique. If he adopts the new technique, the productivity factor will become 36. If Ronald adopts the new technique, what is his average total cost of manufacturing 140 motors? Did the increase in the productivity factor increase or decrease the average total cost of producing 140 motors?

Quizplus · Accepted Answer

The Answer of Ronald's Outboard Motor Manufacturing plant has the following short-run cost function:
C(q, A, K) =  
+ 500K, where q is the number of motors produced, K is the number of machines leased, and A is a productivity factor of technology. Currently, A is 25 and Ronald uses 20 machines. Ronald is investigating a new production technique. If he adopts the new technique, the productivity factor will become 36. If Ronald adopts the new technique, what is his average total cost of manufacturing 140 motors? Did the increase in the productivity factor increase or decrease the average total cost of producing 140 motors?

Ronald's Outboard Motor Manufacturing Plant Has the Following Short-Run Cost