This Phone Center Uses Only Equipment and Workers to Provide

question 34

Multiple Choice

This phone center uses only equipment and workers to provide service. $$\begin{array} { | c | c | c | c | c | c | } \hline \begin{array} { c } \text { Output } \\\text { (units) }\end{array} & \text { Equipment } & \text { Workers } & \text { Total Cost } & \begin{array} { c } \text { Marginal } \\\text { Cost }\end{array} & \begin{array} { c } \text { Average } \\\text { Variable Cost }\end{array} \\\hline 0.5 & 1 & 2 & & & \\\hline 1 & 1 & 4 & & & \\\hline 3 & 1 & 6 & & & \\\hline 8 & 1 & 8 & & & \\\hline 11 & 1 & 10 & & & \\\hline 12 & 1 & 12 & & & \\\hline\end{array}$$
Assuming equipment costs $10 per unit and each worker earns $5,Average Variable Costs are minimized when output is approximately

• A)3 units.
• B)8 units.
• C)11 units.
• D)12 units.

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Definitions:

Operating Lease

A lease agreement allowing for the use of an asset without ownership, typically with shorter terms than a finance lease.

Residual Value

The projected valuation of an asset at the completion of its operational life.

Capital Lease

A lease agreement that has the characteristics of a purchase agreement, where the lessee assumes some risks and benefits of ownership.

Direct Lease

A rental agreement directly between the landlord and tenant, excluding any subleasing arrangements.