Hiring spree at Tesla Motors Bay Area-based electric car maker Tesla is looking

Question

Hiring spree at Tesla Motors

Bay Area-based electric car maker Tesla is looking to hire 1,648 workers to expand its model lineup, build a battery factory, and develop self-driving cars.

Source: CBS San Francisco, December 8, 2015

Explain the effects of the expansion plan on Tesla's total fixed cost, total variable cost, short-run ATC curve, and LRAC curve.

Building a battery factory will increase Tesla's ______.

Hiring more workers will increase Tesla's ______.

A.total fixed cost; total variable cost

B. total variable cost; total fixed cost

C. total fixed cost; total fixed cost

D. marginal cost; total fixed cost

E. total cost; total fixed cost

When Tesla builds a battery plant and increases output by expanding its model lineup and producing self-driving cars, ______.

A.its LRAC curve shifts upward

B. its LRAC curve shifts downward

C. it moves to the LRAC curve associated with the increased plant

D. it moves to the ATC curve associated with the increased plant and moves rightward along its LRAC curve

E. it moves to the ATC curve associated with the increased plant and moves leftward along its LRAC curve

Explanation / Answer

Answer.)

Q1.) A.) Total fixed cost, Total variable cost

Adding capacity to produce more output is generally considered as expending on fixed input while adding more labor power is expending on variable cost.

Q2.) D.) It moves to the ATC curve associated with the increased plant and moves rightward along its LRAC curve.

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