Question

7. There are two ways of mowing grass, manually and using a machine. The marginal costs of mowing grass using the different methods are MC1=0.5q, and MC2=20+q2, where q; represents the number of squared feet mowed using each method (method 1 is by machine and method 2 is manually). If you want to mow 1000 squared feet at the lowest possible cost, you should a) mow only by machine, because that way the MC is lower b) mow 320 squared feet by machine and 680 squared feet manually c) mow all 1000 sq. feet manually d) mow 680 squared feet by machine and 320 squared feet manually 8. There are two ways of mowing grass, manually and using a machine. The marginal costs of mowing grass using the different methods are MC1=0.5qı and MC2=20+q2, where qi represents the number of squared feet mowed using each method (method 1 is by machine and method 2 is manually). At the point of cost minimization, the MCs are a) MC1 = 340, MC2 =680 b) MC1 =340, MC2 =340 c) MC1 = 680, MC2 =340 d) impossible to calculate from the information given

Answer 1

Q7) option A)

since MAC is Lower for first Firm,that is by machines, thus for least cost , use only Machines

Q8) option B)

MC1 = MC2, & q1+q2 = 1000

.5q1 = 20+q2

Put , q2 = 1000-q1

.5q1 = 20+1000-q1

1.5q1 = 1020

q1* = 680

q2* = 320

now MC1 = .5q1* = 340

MC2 = 20+320 = 340