Question
Your friend runs a food truck where she sells toasted Cuban sandwiches. Together you have estimated the shortrun cost function of the food truck to
Your friend runs a food truck where she sells toasted Cuban sandwiches. Together you have estimated the shortrun cost function of the food truck to beTC= 80 + 4q, whereTCis the total cost andqis the total quantity of toasted sandwiches, both measured in thousands as they are annual figures.
(b)What is the total fixed cost for the foodtruck?
(c)The food truck has a great year, selling 200 sandwiches per night and operating for a total of 250 nights (5 nights a week for 50 weeks). How any sandwiches have they sold and what is the average variable cost?
(d)Whatisthemarginalcostofproducingatoastedsandwichatthislevelofoutput?(1mark)
(e)Given the sandwich output in part (c), what is the average fixed cost of toasted sandwiches?
(f)Suppose your friend wants to expand their business by running a second truck which will cost $40,000, increasing total fixed costs by this amount. Expanding the business means they will have access to volume discounts on the bread, meats and cheeses that go into the sandwiches, reducing the average variable costs per sandwich to $3. Provide the new total cost equation for the expanded business.
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