# Microeconomics, fixed costs variable cost, how?

• Mar 18th 2012, 10:32 AM
benjixbunn
Microeconomics, fixed costs variable cost, how?
Kanata Corporation is a leading manufacturer of telecommunications equipment based in Ontario, Canada.
Its main products are micro-processor controlled telephone switching equipment, called automatic private branch exchanges (PABXs), capable of handling 8 to 3,000
telephone extensions.
Severe price cutting throughout the PABX industry continues to put pressure on sales and margins, even though the company eliminated over 500 jobs last year.
To better compete against increasingly aggressive rivals, the company is contemplating the construction of a new production facility capable of producing 1.5
million units per year. Kanata's in-house engineering estimate of the total cost function for the new facility is:
TC = \$3,000 + \$1,000Q + \$0.003Q^2

MC = \$1,000 + \$0.006Q

where TC = Total Costs in thousands of dollars,
Q = Output in thousands of units,
and MC = Marginal Costs in thousands of dollars

1. what are the fixed costs?

2. What are the variable costs?

3. Find the marginal cost function, MC (q).

4. Find the average cost function ATC (q)

5. WHAT is the difference between marginal cost and average total cost?

6.
Estimate minimum efficient scale in this industry? I know the answer is 1 million...

How to do this? what are the answers?
• Mar 18th 2012, 07:50 PM
Wilmer
Re: Microeconomics, fixed costs variable cost, how?
WHY do you need to know?
You work for that company?
Or this is homework?

As an aside, my grandson plays for the Orleans Red Sox (baseball)
and we often play against the Kanata team (Little League)...
• Mar 18th 2012, 09:36 PM
benjixbunn
Re: Microeconomics, fixed costs variable cost, how?
its an assignment for my microeconomics class..
• Mar 19th 2012, 05:04 AM
SpringFan25
Re: Microeconomics, fixed costs variable cost, how?

However, some of these questions almost fall into the "what is the definition of..." category...this information should be in your class notes.
• Mar 19th 2012, 10:27 AM
benjixbunn
Re: Microeconomics, fixed costs variable cost, how?
this assin. was just IF we wanted to do it for extra help...doesnt count towars final grade at all....but i have figured the answers myself....
• Mar 19th 2012, 11:47 AM
Wilmer
Re: Microeconomics, fixed costs variable cost, how?
Quote:

Originally Posted by benjixbunn
this assin. was just IF we wanted to do it for extra help...doesnt count towars final grade at all.......

Would have been nice if you had stated that in your original post...