This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5

-Refer to Figure 7-5. What is the total cost of producing 1500 basketballs per week, assuming the firm uses the optimal plant size?
A) $1500
B) $15 000
C) $22 500
D) $36 000

Question

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5
 
-Refer to Figure 7-5. What is the total cost of producing 1500 basketballs per week, assuming the firm uses the optimal plant size?
A) $1500 
B) $15 000 
C) $22 500 
D) $36 000

Quizplus · Accepted Answer

The optimal plant size for producing 1500 basketballs per week is Plant size 3, as it corresponds to the lowest point on the SRATC curves. At this plant size, the ATC is approximately $15 per basketball. Therefore, the total cost of producing 1500 basketballs per week is:
Total cost = ATC x Quantity
Total cost = $15 x 1500
Total cost = $22 500

This Figure Shows the Long-Run Average Total Cost Curve for a Firm