Microeconomics 18th Edition by Campbell McConnell, Stanley Brue, Sean Flynn

Exercise 11

Answer the following questions on the basis of this information for a single firm: total cost of capital = $1,000; price paid for labor = $12 per labor unit; price paid for raw materials = $4 per raw-material unit.
a. Suppose the firm can produce 5,000 units of output by combining its fixed capital with 100 units of labor anD₄50 units of raw materials. What are the total cost and average total cost of producing the 5,000 units of output
b. Now assume the firm improves its production process so that it can produce 6,000 units of output by combining its fixed capital with 100 units of labor anD₄50 units of raw materials. What are the total cost and average cost of producing the 6,000 units of output
c. Refer to your answers to 8a and 8b and explain how process innovation can improve economic efficiency.