Wastberg produces its high-end Irving desk-lamps in two facilities. At facility
ID: 1158489 • Letter: W
Question
Wastberg produces its high-end Irving desk-lamps in two facilities. At facility 1, the marginal cost of production is equal to MC1 = 30 + 4 Q1 , while the marginal cost at facility 2 is MC2 = 60 + 6 Q2 . The fixed cost is twice as high in facility 1 than it is in facility 2. Wastberg plans to produce 200 lamps and it wants to allocate them between the two plants in a cost minimizing fashion. Thus, it should
1)Produce 187 at facility 1 and the rest at facility 2.
2)Produce 123 at facility 1 and the rest at facility 2.
3)Produce 77 at facility 1 and the rest at facility 2.
4)Produce all the tables at facility 1.
1)Produce 187 at facility 1 and the rest at facility 2.
2)Produce 123 at facility 1 and the rest at facility 2.
3)Produce 77 at facility 1 and the rest at facility 2.
4)Produce all the tables at facility 1.
Explanation / Answer
option d is correct.
produce all the tables at facility 1 as total cost at facilty 1 is low.
MC1 = 30+4*200 MC2= 60+6*0
= 830 = 60 Total cost = 890
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