Economic Question

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   provided 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)V₂  - 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 V₂ are 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 V_2.  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.