solution

The Haverford Company is considering three types of plants to make a particular

electronic device. Plant A is much more highly automated than plant B, which

in turn is more highly automated than plant C. For each type of plant, average

variable cost is constant so long as output is less than capacity, which is the maximum

output of the plant. The cost structure for each type of plant is as follows:

Derive the average costs of producing 100,000, 200,000, 300,000, and

400,000 devices per year with plant A. (For output exceeding the capacity

of a single plant, assume that more than one plant of this type is built.)

b. Derive the average costs of producing 100,000, 200,000, 300,000, and

400,000 devices per year with plant B. c. Derive the average costs of producing 100,000, 200,000, 300,000, and 400,000 devices per year with plant C.

d. Using the results of parts (a) through (c), plot the points on the long-run

average cost curve for the production of these electronic devices for

outputs of 100,000, 200,000, 300,000 and 400,000 devices per year.