The table shows the marginal cost for a company's product at various production levels. Marginal cost Marginal cost ($/unit) Units ($/unit) Units 3.21 7000 2.14 1000 2.87 8000 2.13 2000 2.78 9000 2.15 3000 2.75 10,000 2.19 4000 2.54 11,000 2.38 5000 2.45 12,000 2.64 6000 2.23 13,000 2.82 (a) Estimate the cost (not including fixed costs) to produce the first 12,000 units by considering batches of 2000 units. Use the initial marginal cost for each batch in your calculations. (b) Use batches of 1000 units and the ending marginal cost for each batch to estimate the cost of raising the production level from 4000 to 11,000 units.

The table shows the marginal cost for a company's product at various production levels. Marginal cost Marginal cost ($/unit) Units ($/unit) Units 3.21 7000 2.14 1000 2.87 8000 2.13 2000 2.78 9000 2.15 3000 2.75 10,000 2.19 4000 2.54 11,000 2.38 5000 2.45 12,000 2.64 6000 2.23 13,000 2.82 (a) Estimate the cost (not including fixed costs) to produce the first 12,000 units by considering batches of 2000 units. Use the initial marginal cost for each batch in your calculations. (b) Use batches of 1000 units and the ending marginal cost for each batch to estimate the cost of raising the production level from 4000 to 11,000 units.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 11MC

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