The government of the province of Laputa (in the Republic of Ivarrona) has installed Telemedicine Kiosks in many urban and rural locations in the country. These Kiosks have medical devices that can capture many important elements of patient vitals – including blood pressure, body temperature, etc. The medical devices have a secure chip that will analyze and transmit this information to the central hub. This chip is called ‘Transmit Secure’ (TS chips from here onwards). Each kiosk needs to have exactly one TS chip installed inside the kiosk securely. The total cost of manufacturing n TS chips by the government is given by: TC(n)= 10 + (n/2) The total cost of installing m units of TS chips by the government is given by: TC(m)= 10 + (m/4) Answer questions 4 & 5 based on the information above.
Based on the information given above, only one of the following statements is correct. Identify the correct statement.
a. The average cost of manufacturing n units of TS chips is increasing in n.
b. The total cost of manufacturing n units of TS chips is decreasing in n.
c. The manufacturing of these TS chips is not characterized by scale economies.
d. The average cost of installing m units of TS chips is constant (neither increasing nor decreasing in m).
e. The marginal cost of installing m units of TS chips is constant (neither increasing nor decreasing in m). 5 points
QUESTION 5 A third-party company offers to manufacture and install, up to 16 TS chips for a total fixed fee of 33 (disregard currency units). The company will charge the same amount even if the government asks it to manufacture fewer TS chips or just install TS chips and not manufacture them or just manufacture TS chips and not install them. The government will need exactly 16 TS chips in all. Should the government take the third-party company up on its offer? Which of the following alternatives below provides the most accurate description of the government’s best option?
a. The government should both manufacture and install the TS chips.
b. The third-party company will be asked to both manufacture and install the TS chips.
c. Ask the company to manufacture the TS chips but the government will install the TS chips.
d. Government will manufacture the TS chips but the third-party company will be asked to install the TS chips.
e. All options lead to exactly the same total cost for the government (the government can choose any option above). 5 points