Describe how such a decision could affect both marginal

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Assignment:

Q1. Scenario on Automation and Cost-Cutting: Consider a car manufacturing company deciding between adding more workers or investing in automation for a specific assembly line to reduce production costs.

a. If automation will reduce variable costs by 30% but involves an increase in fixed costs due to machinery maintenance, how might this impact the company's short-run costs?

b. Describe how such a decision could affect both marginal and average total costs in the long run.

c. Why might the company consider automation over additional labor, and what could be the potential trade-offs?

Q2: Scenario on Competitive Market and Demand Curve: You own a smoothie shop in a town with many competitors. Due to the competitive market, you cannot raise your prices without losing customers.

a. Explain how this scenario reflects the concept of a flat demand curve in a perfectly competitive market.

b. If the marginal cost of producing each smoothie starts to increase as you produce more, what will happen to your profit margin?

c. How could understanding marginal cost help you decide the optimal quantity of smoothies to produce daily?

Reference no: EM133843455

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