Read the Modules on the topic of Cost Analysis and Estimation and your textbook. Answer the questions below in English. Copy and paste from worldwide web-related articles is not allowed. Permission from the author is required. Explain the economic meaning of quantitative results obtained. Submit on or before its due date.

1 What is the minimum efficient scale of production?

2. What are economies of scale and diseconomies of scale? What factors cause these economies or diseconomies

3 Explain the concept of the learning curve and its importance for a firm.

EXERCISE

The St. Thomas Winery plans to open a new production facility in the Napa Valley of California. Based on the information provided by the accounting department, the company estimates fixed costs of $250,000 per year and average variable costs of

AVC = $10 + $0.01Q

where AVC is average variable cost (in dollars) and Q is output measured in cases of output per year:

a. Estimate the total cost and average total cost for the coming year at a projected volume of 4,000 cases.

b. An increase in worker productivity because of greater experience or learning during the course of the year resulted in a substantial cost saving for the company. Estimate the effect of learning on the average total cost if the actual total cost was $522,500 at an actual volume of 5,000 cases.