1. Four plant locations are under consideration for a new microchip plant. Here are estimates of the fixed and variable costs at each location.
|
Location
|
Fixed cost
|
Variable cost
|
|
A
|
$3,500,000
|
$600
|
|
B
|
3,000,000
|
800
|
|
C
|
4,000,000
|
500
|
|
D
|
4,500,000
|
400
|
a. What is the total cost function for each location?
b. Plot the total cost functions for these locations on the same graph.
c. On the graph, identify the range of output for which each location has the least cost.
d. Which location should be selected for an output of 4,000 chips per year? 12,000 chips per year?