# Microeconomics

posted by on .

Trunks owns a junk yard. He can use one of two methods to destroy cars. The first method involves purchasing a hydraulic car smasher that costs \$200/year to own and then spending \$1 for every car smashed into oblivion. The second method involves purchasing a shovel that will last one year and costs \$10 and paying his brother, Scoop, to bury the cars at a cost of \$5 each.

a) What are the cost functions for the two methods, where y is output per year?

b) What is the AC(y) and MC(y) of the first method and second method?

c) If Trunks wrecks 40 cars per year, which method should he use? If he wrecks 50 cars per year, which method should he use? What is the smallest number of cars per year for which it would be cost effective for him to buy hydraulic smasher (round to the nearest whole number)?

------------

a)
c1(y) = y + 200
c2(y) = 5y + 10

b)
First Method:
AC(y)=1+200/y
MC(y)=\$1 (I actually don’t know how to get this…just guessed the answer…)

Second method:
AC(y)=5+10/y
MC(y)=\$5 (I actually don’t know how to get this…just guessed the answer…)

c)
Method 2
Method 1
25 cars per year (I actually don’t know how to get this…just guessed the answer…)

• Microeconomics - ,

a) I agree
b1) I agree
b2) I agree
(To smash 1 additional car cost \$1 in method1 and \$5 in method2)
c1) I agree
c2) I agree
c3) I disagree. Set c1=c2 and solve for y. That is y+200=5y+10 (then round up)