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:

Health Care Market

The economic market that encompasses the sale of medical services and products to individuals aiming to maintain or improve their health.

Negative Externalities

Costs incurred by third parties not involved in the transaction or decision-making process, typically resulting from production or consumption activities.

Positive Externalities

Benefits that occur to third parties as a result of an economic activity, which are not accounted for in the market price.

Perfect Knowledge

A theoretical scenario where all consumers and producers have complete and accurate information about prices and products in the market.