A firm is planning to build one of two types of plants. The short-run total cost of Plant A isCA = 80+2QA+0.5QA2 while the short-run total cost for Plant B is CB=50+QB2.(a) (3 points) Determine the marginal cost functions for each of the 2 plants, and plot themin one graph.(b) (4 points) If an output of 8 units is planned, which plant should be built? How large ofan output is required to justify building Plant A?(c) (3 points) Suppose that the firm already has built both plants. If planned output issufficiently large, the firm should use both facilities, and just one (which one?) if the plannedoutput is sufficiently small. Explain why.(d) (5 points) Suppose planned production is 22 units. How should the firm divide theoutput between the two plants so as to minimize the overall expense of production?
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Oct 14, 2020EXPERT
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