Ford to hire 2,000 and expand capacity Ford Motor Co. will hire 2,000 new worker
ID: 1227176 • Letter: F
Question
Ford to hire 2,000 and expand capacity
Ford Motor Co. will hire 2,000 new workers and spend $1.1 billion to retool and refurbish its Kansas City plant.
Source: Automotive News, May 2, 2013
Retooling and refurbishing the Kansas City plan will increase Ford's ______.
Expanding production and increasing output will increase Ford's ______.
A.
total cost; total fixed cost
B.
marginal cost; total fixed cost
C.
total fixed cost; total fixed cost
D.
total variable cost; total fixed cost
E.
total fixed cost; total variable cost
When Ford retools and refurbishes the Kansas City plant and increases output, ______.
A.
its LRAC curve shifts upward
B.
it moves to the ATC curve associated with the larger plant and moves leftward along its LRAC curve
C.
it moves to the LRAC curve associated with the larger plant
D.
it moves to the ATC curve associated with the larger plant and moves rightward along its LRAC curve
E.
its LRAC curve shifts downward
Ford Motor Co. will hire 2,000 new workers and spend $1.1 billion to retool and refurbish its Kansas City plant. Source: Automotive News, May 2, 2013 Retooling and refurbishing the Kansas City plan will increase Ford's. Expanding production and increasing output will increase Ford's. total cost; total fixed cost marginal cost; total fixed cost total fixed cost; total fixed cost total variable cost; total fixed cost total fixed cost; total variable cost When Ford retools and refurbishes the Kansas City plant and increases output, . its LRAC curve shifts upward it moves to the ATC curve associated with the larger plant and moves leftward along its LRAVC curve it moves to the LRAC curve associated with the larger plant it moves to the ATC curve associated with the larger plant and moves rightward along its LRAC curve its LRAC curve shifts downwardExplanation / Answer
In production total cost represents the cost of the input used plus the overhead cost of production. Fixed cost is the cost of fixed input of production. The fixed inputs are those that does not change in the short run, such as land, capital etc. The fixed cost also does not depend on the level of output. The producers have to incur these costs even if the total production and sales are zero. Variable cost is the cost that varies with the level of output produced. It is the cost of inputs that vary in the short run, such as labor cost.
Therefore,
Retooling and refurbishing the Kansas City plan will increase Ford's fixed cost .
Expanding production and increasing output will increase Ford's variable cost .
Therefore, the correct option is: E. total fixed cost; total variable cost
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Increasing production and fixed cost increases the plant size and moves the firms rightward along its long run average cost (LRAC).
Therefore, the correct option is: D. it moves to the ATC curve associated with the larger plant and moves rightward along its LRAC curve
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