please answer number 9 a b c 9. Please answer questions 9a through 9c below. You
ID: 1105579 • Letter: P
Question
please answer number 9 a b c
9. Please answer questions 9a through 9c below. You produce televisior sets. Currently you produce 10 television sets at a total cost of $60. 9a. What is your average cost of producing 10 television sets? Please show calculation and work. 9b. Suppose that you could produce 20 television sets at a total cost of S80. If you do produce 20 television sets, what will-your average total cost be? Has your average total cöst increased or decreased and does your firm experience economies of scale or diseconomies of scale an show your work and calculations and then explain. 2 d why? Please 9c. Suppose that you could produce 30 television sets at a total cost of S210. If you do produce 30 television sets, what will your average total cost be? Has your average total cost increased or decreased from your answer in 8b and does your firm experience economies of scale or diseconomies of scale and why? Do you think your firm will experience some problems if your firm does experience diseconomies of scale? What can you, as a manager of the television set company, do to correct this problem? Explain. Please show your work and calculations and then explain 0 USExplanation / Answer
Answer:
9a
Total cost = $60
Number of television sets produced = 10
Calculate average cost of producing 10 television sets -
Average cost = Total cost/Number of television sets produced = $60/10 = $6
The average cost of producing 10 television sets is $6 per set.
9b
Total cost = $80
Number of television sets produced = 20
Calculate average cost of producing 20 television sets -
Average cost = Total cost/Number of television sets produced = $80/20 = $4
The average cost of producing 20 television sets is $4 per set.
With respect to answer of part (a), average total cost has decreased as firm has increased production from 10 television sets to 20 television sets.
When with increase in production, average total cost decreases, firm is said to be experiencing economies of scale.
In given case, increase in production from 10 television sets to 20 television sets results in decrease in average total cost.
Thus, firm experiences economies of scale.
9c
Total cost = $210
Number of television sets produced = 30
Calculate average cost of producing 30 television sets -
Average cost = Total cost/Number of television sets produced = $210/30 = $7
The average cost of producing 30 television sets is $7 per set.
With respect to answer of part (a), average total cost has increased as firm has increased production from 20 television sets to 30 television sets.
When with increase in production, average total cost increases, firm is said to be experiencing diseconomies of scale.
In given case, increase in production from 20 television sets to 30 television sets results in increase in average total cost.
Thus, firm experiences diseconomies of scale.
Yes, our firm will experience problems if firm does experience diseconomies of scale because diseconomies of scale will result in increase in average total cost of production as output produced is increased.
Given the price, this increase in average total cost due to diseconomies of scale will result in fall in profit of firm.
Thus, profitability of firm will adversely influenced due to diseconomies of scale.
The manager of television set company should reduce production until production reaches its minimum efficient scale.
This way problem of diseconomies of scale can be corrected.
.
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