With 100.000 units,=100.Variable cost is 55g=(55)(100)=5500 (or $5,500.000). q 100 e.What is its marginal cost per unit produced? With constant average variable cost,marginal cost is equal to average variable cost,$55(or $55.000). d.What is its average fixed cost? At q=100,average fixed cost is TFC_$200 =$20rS2.000) 100 e.Suppose the company borrows money and expands its factory.Its fixed cost rises by $50,000,but its variable cost falls to $45,000 per 1,000 units.The cost of interest(i)also enters into the equation.Each one-point increase in the interest rate raises costs by S3.000.Write the new cost equation. Fixed cost changes from 200 to 250.measured in thousands.Variable cost decrases from 55 to5.also measured in thousands. Fixed cost also includes interest charges:3i.The costequation is C=250+45g+3 10.A chair manufacturer hires its assembly-line labor for $30 an hour and calculates that the rental cost of its machinery is $15 per hour.Suppose that a chair can be produced using 4 hours of labor or machinery in any combination. If the firm is c urrently using3 hours of labor for each hour of machine time,is it imizing its of prod an? Ifso,why?If not,ho can it in mprove the situation?Graphically illustrate the isoquant and the two isocost lines,for the current combination of labor and capital and the optimal combination of labor and capital. If the firm can produce one chair with either four hours of labor or four hours of capital.machinery.or any combination.then the isoquant is a straight line with a slope of-1 and intercept atK=4andL=4.as depicted in figure 7.10. 20 The isocost line,TC=30L+15K has a slope of- 15-when plotted with capital on the vertical axis and has intercepts at =I and The oost minimizing point is a corner solution.where L=0 and K=4.At that point.total cost is $60. ilustrated on the graph The first from the origin and represents the higher cos($105)ofus ing3 labor and 1 capita The firm will find it optimal to move to the second isocost line which is closer to the origin,and which represents a lower cost($60).In general,the firm wants to be on the lowest isocost line possible,which is the lowest isocost line that still intersects the given isoquant.With 100,000 units, q = 100. Variable cost is 55q = (55)(100) = 5500 (or $5,500,000). Average variable cost is  TVC q = $5500 100 = $55, or $55,000. c. What is its marginal cost per unit produced? With constant average variable cost, marginal cost is equal to average variable cost, $55 (or $55,000). d. What is its average fixed cost? At q = 100, average fixed cost is  TFC q = $200 100 = $2 or ($2,000). e. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 1,000 units. The cost of interest (i) also enters into the equation. Each one-point increase in the interest rate raises costs by $3,000. Write the new cost equation. Fixed cost changes from 200 to 250, measured in thousands. Variable cost decreases from 55 to 45, also measured in thousands. Fixed cost also includes interest charges: 3i. The cost equation is C = 250 + 45q + 3i. 10. A chair manufacturer hires its assembly-line labor for $30 an hour and calculates that the rental cost of its machinery is $15 per hour. Suppose that a chair can be produced using 4 hours of labor or machinery in any combination. If the firm is currently using 3 hours of labor for each hour of machine time, is it minimizing its costs of production? If so, why? If not, how can it improve the situation? Graphically illustrate the isoquant and the two isocost lines, for the current combination of labor and capital and the optimal combination of labor and capital. If the firm can produce one chair with either four hours of labor or four hours of capital, machinery, or any combination, then the isoquant is a straight line with a slope of -1 and intercept at K = 4 and L = 4, as depicted in figure 7.10. The isocost line, TC = 30L + 15K has a slope of  − 30 15 = −2 when plotted with capital on the vertical axis and has intercepts at  K = TC 15 and  L = TC 30 . The cost minimizing point is a corner solution, where L = 0 and K = 4. At that point, total cost is $60. Two isocost lines are illustrated on the graph. The first one is further from the origin and represents the higher cost ($105) of using 3 labor and 1 capital. The firm will find it optimal to move to the second isocost line which is closer to the origin, and which represents a lower cost ($60). In general, the firm wants to be on the lowest isocost line possible, which is the lowest isocost line that still intersects the given isoquant