15000+ 500K, 2. A Motor Manufacturing plant has the following short-run cost fun

Question

15000+ 500K, 2. A Motor Manufacturing plant has the following short-run cost function: Cq, A, K) 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. urig 140mo Did the increase in the productivity factor increase or decrease the average total cost of producing 140 motors?

Explanation / Answer

Given C = 150*q^2 / (A^2 * K) + 500K

K = 20, A = 36, q = 140

Total average cost

C = 150*q^2 / (A^2 * K) + 500K

C = 150*140^2 / (36^2*20) + 500*20 = 10,113.43

When K increases, 150*q^2 / (A^2 * K) decreases. Therefore C decreases.

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