Saturday

March 28, 2015

March 28, 2015

Posted by **Anonymous** on Wednesday, October 14, 2009 at 9:44am.

Bob, owner of Bob’s Auto, sells cars. The number of car sales is represented by y. Bob buys autos at a price of A each and has no other costs. He only buys as many cars as he sells.

a) What is his total cost if he sells 10 cars? What if he sells 20 cars? What is the equation for Bob’s total costs assuming he sells “y” cars?

b)What is Bob’s AC(y)? For every additional auto Bob sells, by how much do his costs increase? What is Bob’s MC (y)?

c) What does Bob’s ACV and MC costs look like in a graph if A = $20?

d) Suppose Bob has to pay B per year to produce obnoxious television commercials. What is Bob’s new total cost curve and his average cost curve and his marginal cost curve?

e) If A = 20 and B = 100, evaluate Bob’s AC at y output levels of 5,10, 25 and 40.

================

MY ANSWERS:

a)

10A is his total cost if he sells 10.

20A is his total cost if he sells 20.

C(y)=Ay

b)

AC(y)=A/y is his AC function.

His costs increase 1/y. MC(y)=A/y is his MC.

c) a horizontal flat line at AC/MC (or y-axis) = 20 (where the x-axis is his output-number of cars sold- and the y-axis is his AC/MC)

d)

c(y) = Ay + B

AC(y) = A + B/y

MC(y) = A + By

e)

(5,40) at output level (y) = 5

(10,30) at y = 10

(20,25) at y = 20

(25,24) at y = 25

(40,22.5) at y = 40

- MircroEconomics - Production & Cost -
**economyst**, Wednesday, October 14, 2009 at 3:37pma) I agree

b) His total cost from a) is Ay. So average cost is Ay/y = A. Since it cost Bob A for each car, regardless of the number, MC=A

c) I agree

d) for C(y) = Ay + B and

AC(y) = (Ay + B)/y = A + B/y (I agree)

However regardless of the advertising expenses, it still cost Bob A per car, so, MC(y) = A

e) I agree

**Answer this Question**

**Related Questions**

You are interested in buying a new car and Bob let - You are interested in ...

business - You are interested in buying a new car and Bob let's you borrow one ...

Health info - please check my answer thanks :) Mr. Jones, angry at Dr. Bob , ...

Algebra--to Bob (Please) - Bob, thank you for the info. You always make ...

statistics - Bob is a salesman. He receives $20 for each sales plus a fixed ...

Calculus--Please help. - I really need help, this is my second post. Information...

financial resources - Bob Brown was recently involved in a minor auto accident. ...

business law - you are interested in buying a new car an bob lets you borrow one...

law - You are interested in buying a new car and Bob let's you borrow one of the...

financial resources - Assignment Type: Discussion Board Deliverable Length: 2-3...