Final answer:
The question involves calculating production costs with a given fixed cost and varying marginal costs for producing computers. Economies of scale come into play as the average cost per unit decreases with increased output, such as with alarm clock production. The total cost is determined by summing fixed costs with the marginal costs for desired units.
Step-by-step explanation:
The student's question relates to the calculation of production costs for a computer company. The fixed costs are $250, while the marginal costs vary per unit produced. The costs are $700 for the first, $250 for the second, and so on, until $500 for the seventh unit. Economies of scale are demonstrated as the average cost of production decreases with higher output. This concept is illustrated with the example of producing alarm clocks, where the average cost per unit drops as the number of units produced increases.
To calculate the total cost for any number of units, one would sum the fixed cost and all relevant marginal costs. For example, the total cost for producing three computers would be $250 (fixed) + $700 (first computer) + $250 (second computer) + $300 (third computer). In cases of maximum production efficiency, companies experience economies of scale, leading to lower average costs as production scales up.
Total costs in any scenario can be found by adding fixed costs to the cumulative marginal costs of production up to the desired quantity. This is significant in budgeting and pricing strategies for businesses.