The fixed costs of producing a basketball are $25000 and the cost of raw material is $5 each. What is the number of balls that need to be produced to make the most efficient use of financial resources.
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To produce basketballs the initial investment in machinery, also known as fixed costs, is $25000. The cost of raw material for each ball is $5.
The total cost to produce x basketballs is C(x) = 25000 + x*5.
If the most efficient use of resources is in producing N basketballs, the solution of C'(x) = 0 is x = N and C''(N) > 0
C(x) = 25000 + x*5
C'(x) = 5
This is positive for all values of x.
From the information given, the company makes better use of its initial investment, the more number of basketballs it produces.
In theory, the efficiency is maximized in producing an infinite number of basketballs.
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