Problem: The table shows the production function of Cathy's Cakes.
Labor Output (cakes per day)
(Workers per day)
Plant 1 Plant 2 Plant 3 Plant 4
1 20 40 55 65
2 40 60 75 85
3 65 75 90 100
4 65 85 100 110
Ovens (number) 1 2 3 4
Cathy Pays $100 a day for each oven she rents and $50 a day for each Kitchen worker she hires.
a. Find and graph the average total cost curve for each plant size
b. Draw Cathy's long-run average cost curve.
c. Over what output range does Cathy experience economics of scale?
d. Explain how cathy uses her long-run average cost curve to decide how many ovens to rent?