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Questions › JNU › JNU SSS 2012 › Q59
1 mark, −0.25Microeconomics › Costs of production › Cost minimisation and long-run input choiceModerateabout 1 min

JNU SSS 2012 Question 59: Costs of production

A firm produces a certain good and has two plants. To produce y1y_1y1​ units of the good in plant 1, the total cost for the firm is c1(y1)=y1×y1c_1(y_1) = y_1 \times y_1c1​(y1​)=y1​×y1​. To produce y2y_2y2​ units of the good in plant 2, the total cost for the firm is c2(y2)=y2×y2c_2(y_2) = y_2 \times y_2c2​(y2​)=y2​×y2​.

Suppose the firm produces output yyy at minimum cost. Which of the following is true?

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Plain-text version

A firm produces a certain good and has two plants. To produce y₁ units of the good in plant 1, the total cost for the firm is c₁(y₁) = y₁ × y₁. To produce y₂ units of the good in plant 2, the total cost for the firm is c₂(y₂) = y₂ × y₂. Suppose the firm produces output y at minimum cost. Which of the following is true? (A) All of the output is produced in one of the two plants (B) Output y/2 is produced in plant 1 and output y/2 is produced in plant 2 (C) All divisions of output y between the two plants result in the same cost for the firm (D) None of the above

Also written as: A firm produces a certain good and has two plants. To produce y_1 units of the good in plant 1, the total cost for the firm is c_1(y_1) = y_1 * y_1. To produce y_2 units of the good in plant 2, the total cost for the firm is c_2(y_2) = y_2 * y_2. Suppose the firm produces output y at minimum cost. Which of the following is true?

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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Question from the JNU SSS 2012 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.