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
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?