A firm has an order to supply 20 units of output. It can divide production across two plants, 1 and 2, with cost functions c1(q1)=q12 and c2(q2)=3q22, subject to q1+q2=20. To meet the total production target at minimum cost, the amount of output the firm should produce in its first plant is
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A firm has an order to supply 20 units of output. It can divide production across two plants, 1 and 2, with cost functions c₁(q₁)=q₁² and c₂(q₂)=3q₂², subject to q₁+q₂=20. To meet the total production target at minimum cost, the amount of output the firm should produce in its first plant is (A) 20 units. (B) 15 units. (C) 10 units. (D) 5 units.
Also written as: A firm has an order to supply 20 units of output. It can divide production across two plants, 1 and 2, with cost functions c_1(q_1)=q_1^2 and c_2(q_2)=3q_2^2, subject to q_1+q_2=20. To meet the total production target at minimum cost, the amount of output the firm should produce in its first plant is
Costs of production has come up 83 times in 7 exams since 2006.
What this question tests
This question is on Cost minimisation and long-run input choice, part of Costs of production in Microeconomics.
Choosing inputs to produce a given output at least cost, including across several plants.
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