Tony's Pizza's Production Function Is Shown in the Table Above

question 160

Essay

Tony's Pizza's production function is shown in the table above. Tony hires workers at a wage rate of $50 a day and his total fixed cost is $100 for Plant 1 and $150 for Plant 2.
a) Calculate Tony's Pizza's average total costs for Plant 1. Draw the short-run average total cost curve.
b) Calculate average total costs for Plant 2. Draw the short-run average total cost curve on the same figure that you used for part a.
c) In the figure, illustrate Tony's long-run average cost curve.
d) If Tony wants to produce 34 pizzas per day, what plant size should he choose? Over what output range is it efficient to operate Plant 1?

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