Use the following information to work Problem 6. The table shows the production function of Bonnie's Balloon Rides. Bonnie's pays $500 a day for each balloon it rents and $25 a day for each balloon operator it hires. Labor (workers per day) 10 20 30 40 50 Balloons Plant 1 6 10 13 15 16 1 Output (rides per day) Plant 2 10 15 18 20 21 2 Plant 3 13 18 22 24 25 3 Plant 4 15 20 524274 26 6.a. Graph the ATC curves for Plant 1 and Plant 2. Explain why these ATC curves differ. 6.b. Graph the ATC curves for Plant 3 and Plant 4. Explain why these ATC curves differ. 6.c. On Bonnie's LRAC curve, what is the average cost of producing 15 rides and 18 rides a day? 6.d. Explain how Bonnie's uses its long-run average cost curve to decide how many balloons to rent.
Use the following information to work Problem 6. The table shows the production function of Bonnie's Balloon Rides. Bonnie's pays $500 a day for each balloon it rents and $25 a day for each balloon operator it hires. Labor (workers per day) 10 20 30 40 50 Balloons Plant 1 6 10 13 15 16 1 Output (rides per day) Plant 2 10 15 18 20 21 2 Plant 3 13 18 22 24 25 3 Plant 4 15 20 524274 26 6.a. Graph the ATC curves for Plant 1 and Plant 2. Explain why these ATC curves differ. 6.b. Graph the ATC curves for Plant 3 and Plant 4. Explain why these ATC curves differ. 6.c. On Bonnie's LRAC curve, what is the average cost of producing 15 rides and 18 rides a day? 6.d. Explain how Bonnie's uses its long-run average cost curve to decide how many balloons to rent.
Chapter11: The Firm: Production And Costs
Section: Chapter Questions
Problem 15P
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Step 1: define production function, average cost and total cost
VIEWStep 2: derive the average total cost for Plant 1 and Plant 2
VIEWStep 3: derive the average cost for Plant 3 and Plant 4
VIEWStep 4: calculate the average cost of producing 15 rides and 18 rides a day
VIEWStep 5: Explain how Bonnie's uses its long-run average cost curve to decide how many balloons to rent.
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