The Table Below Contains Short Run Average Cost Data for Five

question 12

Essay

The table below contains short run average cost data for five different plant sizes for C3PO Technologies Ltd. $\begin{array}{cccccc}\hline \text { Output } & \text { Plant 1 } & \text { Plant 2 } & \text { Plant 3 } & \text { Plant 4 } & \text { Plant 5 } \\\hline 1 & \$ 2 & / & / & / & / \\2 & 1.80 & \$ 2.10 & / & / & / \\3 & 1.90 & 1.90 & \$ 2.20 & / & / \\4 & 2.10 & 1.70 & 1.90 & \$ 2.30 & \\5 & 2.30 & 1.80 & 1.80 & 2.00 & \$ 2.40 \\6 & 2.70 & 2.00 & 1.70 & 1.80 & 2.10 \\7 & / & 2.30 & 1.80 & 1.60 & 1.80 \\8 & / & / & 2.10 & 1.50 & 1.60 \\9 & / & / & / & 1.70 & 1.50 \\10 & / & / & / & / & 1.40 \\11 & / & / & / & / & 1.60 \\12 & / &/ & / & / & 1.80 \\\hline\end{array}$
a) On the grid in the figure below, graph the short-run average cost curves for the five plants. b) What is the right-size of plant for each of the following output levels: 2, 4, 6, 8 and 10?
c) Do a sketch of the long-run average cost curve in the graph above.
d) What plant size would C3PO need to use in order to achieve MES?
e) If C3PO is producing an output level of 6 in plant size 4, does excess capacity exist?

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