A manufacturer of custom carbon-fiber bicycle frames, Velox Ltd, faces the weekly cost schedule shown in the table below:
| Output (QQQ, frames per week) | Total Cost (TCTCTC, £) |
|---|---|
| 10 | 4,5004,5004,500 |
| 20 | 7,0007,0007,000 |
| 30 | 9,0009,0009,000 |
| 40 | 12,80012,80012,800 |
| 50 | 17,50017,50017,500 |
At which level of weekly output is productive efficiency achieved, and why?
At Q=30Q = 30Q=30 frames, because the average total cost (ATCATCATC) is minimised at £300£300£300 per frame.
At Q=20Q = 20Q=20 frames, because the marginal cost of increasing production from 101010 to 202020 frames is minimised at £250£250£250 per frame.
At Q=50Q = 50Q=50 frames, because producing at the maximum scale of output fully maximises economies of scale.
At Q=40Q = 40Q=40 frames, because this represents the point where marginal cost equals average total cost.
