Determine the least cost size

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Reference no: EM1392861

1. If the Total Cost (TC) assembling and processing milk is given as

TC = A + aV2 + bN2 - cVN, where, V is the size and N is the number of plants.

a. Determine the least cost size and number of the milk processing plant using the equation provide above.

b. We found in class that total assembling cost (TAC) is a function of only N. Assuming C = 0, that is VN is zero.  Derive total assembling cost (TAC), total variable assembling cost (TVAC), total average assembling cost (TAAC), marginal assembling cost (MAC).

2. The Net Revenue (NR) for different product forms (1 and 2), which equaled to Total Revenue (TR) minus Total Cost (TC) is given as below:

NR = k1 (P1 - t1 D)V1+ k2 (P2 - t2 D)V- A - C1 V1 - C2 V2

a. Derive the marginal cost for the two products 1&2 and show that it is a constant.

b. If V1 and V2are volumes, how would you minimize cost?

c. If NR is profit, how do you maximize profit?

d. Total Cost (TC) is given as A - C1 V1 - C2 V2.  Derive the average total cost (TAC) and the average variable cost (AVC).

e. What does A in the TC function symbolize?

  1. Milk Processing Cost of a firm is given by

TC = 2y3-2y2 + b

  1. Derive the TVC; TFC; ATC; AFC; and MC
  2. Find the level of y that minimizes the TVC; ATC, and AVC.

Reference no: EM1392861

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