Suppose Noah and Naomi have just acquired a second garden bench production plant

Question

Suppose Noah and Naomi have just acquired a second garden bench production plant. Production costs are C1(Q1) = 6(Q1)2 at plant 1 and C2(Q2) = 2(Q2)2 at plant 2, where Q1 and Q2 are the number of benches produced at each plant per week. The corresponding marginal costs at the two plants are MC1 = 12Q1 and MC2 = 4Q2.

(a) If Noah and Naomi plan to produce 100 benches per week and want to do it as economically as possible, how many benches should they produce at each plant?

(b) If Noah and Naomi plan to produce Q benches per week and want to do it as economically as possible, how many benches should they produce at each plant?

Explanation / Answer

It is economical if MC1 = MC2

For producing 100 benches, plant 1 can produce = 100*1/4 = 25

Plant 2 can produce = 75

This way MC1 =MC2 = 300

B) In plant 1 = Q*1/4 = Q/4

In plant 2 = 3Q/4

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.