Reconsider Wimpy’s Burgers from problem l.
In a slow year, Wimpy’s Burgers will produce 1 million hamburgers at a total cost of $1.75 million. In a good year, it can produce 2 million hamburgers at a total cost of $2.25 million. What are the fixed and variable costs of hamburger production?
a. What is the average cost per burger when the firm produces 1 million hamburgers?
b. What is average cost when the firm produces 2 million hamburgers?
c. Why is average cost lower when more burgers are produced?