Suppose Argyle Sachs Has to Choose Between Building a Smaller

question 6

Essay

Suppose Argyle Sachs has to choose between building a smaller sweater factory and a larger sweater factory.In the following graph,the relationship between costs and output for the smaller factory is represented by the curve ATC₁,and the relationship between costs and output for the larger factory is represented by the curve ATC₂. a.If Argyle expects to produce 3,600 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain?
b.If Argyle expects to produce 5,000 sweaters per month,should he build a smaller factory or a larger factory? Briefly explain.
c.If the average cost of producing sweaters is lower in the larger factory when Argyle produces 6,500 sweaters per week,why isn't it also lower when Argyle produces 4,000 sweaters per week?

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Definitions:

Air Conditioner Filters

Components in air conditioning systems designed to remove dust, pollen, and other particles from the air.

Risk of Loss

Refers to the possibility that an asset might be destroyed, damaged, or lost, causing financial loss to its owner.

Delivery

The process of transporting goods from one location to another or the act of transferring ownership or possession of an asset from a seller to a buyer.

Sale on Approval

A conditional sales agreement allowing the buyer to return the item if it doesn't meet their approval.