For better or worse, Western Motors has decided to build its new plant in Winnipeg. In the short run it must use 16 tonnes of steel. The production function and marginal product in problem 1. above still apply. In Winnipeg steel costs $4 per tonne and labour cost $4 per hour.
a) prepare the short run cost of production, C, as a function of A.
b) How much will it cost to produce 48 automobiles (A=48)?
c) What are the average fixed (AFC) and average variable cost functions (AVC) and average cost(AC) functions? prepare down their algebraic form and graph them.
d) Where will the marginal cost curve be in relation to the AVC? describe why?