The graphical representation of average total cost and demand curve for automobiles.

Question

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Answer 1

Question

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

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Questions 1-3 use the following case to determine a way to take a single product, like toilet and bundle it in such a way as to extract all of the profit at the time of the initial sale. You go to CostCo or Walmart and you see paper towel sold in a bundle and you wonder how the retailer can make any money. You do a little research and you find that the demand for paper towels is depicted by the following demand curve and marginal cost: P-$2.20 (1/10)*Q MR-$2.20 (2/10) Q МС 0.20 where P is the price of paper towels, MC is the marginal cost of paper towels, MR is the marginal revenue of paper towels and Q is the quantity of paper towels. So you decide to try two different pricing strategies: 1) sell one roll at a time and 2) use multi-part pricing to sell a bundle. For pricing strategy two, you determine that the quantity, price and profit are: Q 20, P $24.0, Profit $20 Q 10, P 1.20, Profit 10 Q 20, P $0.20, Profit 0 = Q 10, P $4.0, Profit $38 a. Q 10, P $4.0, Profit = $38 b. Q 10, P…

Suppose Hubert runs a small business that manufactures shirts. Assume that the market for shirts is a price-taker market, and the market price is $10 per shirt. The following graph shows Hubert's total cost curve. Use the blue points (circle symbol) to plot total revenue, and the green points (triangle symbol) to plot profit for the first seven shirts that Hubert produces, including zero shirts. TOTAL COST AND REVENUE (Dollars) 125 100 75 50 25 -25 -50 0 0 1 2 ☐ ■ U 3 4 5 QUANTITY (Shirts) L 6 Total Cost 7 8 Total Revenue Profit ? Calculate Hubert's marginal revenue and marginal cost for the first seven shirts he produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost.

Answer 2

Question

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

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Answer 3

Question

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

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Answer 4

Question

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

Answer 6

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

Answer 7

Chapter 18, Problem 1SPPA

To determine

To show:

The graphical representation of average total cost and demand curve for automobiles.

Answer 8

Expert Solution & Answer

Explanation of Solution

Average Cost function plays a pivotal role in establishing economies and diseconomies of scale.

Before the automation process and the assembly line production, cost of production of an automobile was exorbitant. This is shown in Panel a) of Figure 1. There were only few firms producing automobiles. Hence, their supply was limited. Average total cost of production curve AC shows the cost of Q1 of automobiles to be A1.

This cost reflects the average cost in 1901 when the technique of production to be used was limited and there were unspecialized workers. With assembly line production, division of labor was achieved. Automobile manufacturers were able to use specialized labor for specific activity. This greatly helped them in achieving economic of scale that reduced average cost of production.

Foundations of Economics (8th Edition), Chapter 18, Problem 1SPPA

With time, there has been more use of machines that have replaced labor. This has reduced the per vehicle cost further down. This is shown by average total cost of production curve AC that shows the cost of Q2 units of automobiles to be A2 in Figure 1.

The demand curve for automobiles in 1901 was low, shown by D1 in Figure 1.People had limited financial sources to buy an automobile. Hence, they demanded fewer automobiles. With already limited supply of automobiles, the price was quite high.

By 2016, the prices have fallen because cost of production has reduced dramatically. Also, the income levels have increased for most of the consumers. This has increased their willingness to pay. Hence, the demand curve for automobiles in 2016 is higher and is shown as D2 in Figure 1.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Average Total Cost:

Average total cost is expressed as the cost incurred by the firm on the production of one unit of the output, on average. It can be measured from the total cost function when the latter is divided by the number of units produced.

Answer 12

Ch. 18 - Prob. 1SPPA Ch. 18 - Prob. 2SPPA Ch. 18 - Prob. 3SPPA Ch. 18 - Prob. 4SPPA Ch. 18 - Prob. 5SPPA Ch. 18 - Prob. 6SPPA Ch. 18 - Prob. 7SPPA Ch. 18 - Prob. 8SPPA Ch. 18 - Prob. 1IAPA Ch. 18 - Prob. 2IAPA

The graphical representation of average total cost and demand curve for automobiles.

To show: The graphical representation of average total cost and demand curve for automobiles.

Explanation of Solution

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Chapter 18 Solutions

To show:

The graphical representation of average total cost and demand curve for automobiles.