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Costs and economies of scale

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Question 13

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, £)
104,5004,5004,500
207,0007,0007,000
309,0009,0009,000
4012,80012,80012,800
5017,50017,50017,500

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.

Costs and economies of scale Questions

  1. A Level
  2. /Economics
  3. /Costs and economies of scale