Scenario: Emily Runs a Small Coffee Roasting Company

Scenario: Emily runs a small coffee roasting company. Labor is the only variable input. Output depends on the size of the coffee roaster (a fixed input) that she rents. She can fit only one roaster in her shop. The table below summarizes possible output per month depending on the number of workers employed and the size of a roaster Emily rents. Assume that workers cannot produce any quantity other than ones shown in the table. So, for example, if Emily wants to produce 3,000 kg per month with a small roaster, then she would have to hire 3 workers and produce 4,000 kg. Emily pays $2,400 per month to each worker she employs. Monthly rental prices are $400 for a small roaster, $650 for a medium roaster, and $880 for a large roaster. In addition, Emily's opportunity cost of being an entrepreneur is $12,000 per month because, with her MBA degree, she could be working for a management consulting firm. You should consider this as a part of the fixed cost.

-Refer to the scenario above.If Emily wants to produce 4,000 kg per month,then the minimum total average cost is ________,which is achieved by renting a ________ roaster.

A) $4.9; small
B) $4.15; medium
C) $2.54; medium
D) $2.95; large

Correct Answer:

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