Estimates of the Industry Long-Run Average Cost of Producing a Type

question 111

Essay

Estimates of the industry long-run average cost of producing a type of plastic hook were made in 1970 and again in 1985. Estimates of these relationships are presented as:
LAC₇₀ = 10 - 0.3Q + 0.05Q²
LAC₈₅ = 8 - 0.6Q + 0.04Q²,
where Q is output in hundreds of cases per day, and LAC is average cost in dollars per unit. Assume that costs are expressed in inflation adjusted or constant dollars. From the information available, can you learn anything about economies of scope, economies of scale, and a learning curve in this industry? Explain. Do these curves reveal anything about the state of technology in this industry? Explain.

Calculate total revenue, total cost, and profit under different scenarios.

Distinguish between explicit and implicit costs and their relevance to economic and accounting profits.

Explain the impact of diminishing marginal product on cost curves.

Identify the components of total costs in production.

---

Definitions:

Sterile Field

A specified area that is considered free from microorganisms.

Clean Gloved

The practice of wearing gloves that are free from dirt, bacteria, or any other contaminants during medical procedures or examinations.

Transferring

The act of moving a patient from one location to another or from one surface to another within healthcare settings, maintaining patient safety.

Bacteriostatic

Bacteriostatic describes a substance that inhibits the growth and reproduction of bacteria without necessarily killing them.