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Kelson Electronics, a manufacturer of DVRs , estimates the following relation between its marginal cost of production and monthly output:

MC = $150 + 0.005Q

Note - I need to be able to show all work so that I can be able to a apply it within a paper.

a. What does this function imply about the effect of the law of diminishing return on Kelson's short-run cost function?

Law of Diminishing returns states: As additional units of a variable input are combined with a fixed input, at some point the additional output (i.e., marginal product starts to diminish.
b. Calculate the marginal cost of production at 1500, 2000, and 3500 units of output.

c. Assume Kelson operates as a price taker in a competitive market. What is this firm's profit -maximizing level of output of the market price is $175?

d. Compute Kelson's short-run supply curve for its product.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91224479
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