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A company buys new, expensive and more advanced equipment which reduces the amount of labor needed to produce an increased level of output. Part a.
A company buys new, expensive and more advanced equipment which reduces the amount of labor needed to produce an increased level of output. Part a. What is likely to be the effect on the ATC (Average Total Cost)? Type your answer and explanation here: Part b. What is likely to be the effect on the AFC (Average Fixed Cost)? Type your answer and explanation here: Part c. How would you expect the change in the AVC (Average Variable Cost) to differ from the change the ATC? Type your answer and explanation here: Extra Credit: (up to 4 points) In this segment of the course, we have looked at different cases of bookkeeping profit** and opportunity cost. a) the bookkeeping profit is greater than the opportunity cost, b) the bookkeeping profit is equal to the opportunity cost, and c) the bookkeeping profit is less than the opportunity cost but more than zero **"Bookkeeping Profit" is calculated using only Explicit Fixed Costs, and does not include Implicit Fixed Costs. Page 5 Please answer these questions with full and clear explanations. You may wish to (but don't have to) illustrate your answers with simple numerical examples. This question has 2 parts. Part a. If the Bookkeeping Profit is less than the Opportunity Cost but more than zero, what is happening now and what is likely to happen in the future? Part a. If the Bookkeeping Profit is greater than the Opportunity Cost, what is happening now and what is likely to happen in the future
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