test2_Memo.pdf - TEST 2 MEMO: 1.1 Wayne Industries produces...

TEST 2 MEMO:
1.1 Wayne Industries produces and sells anvils. Its short-run cost function is ? = ??? + ??? + ??
?
1.1a Write down the Wayne’s average cost (AC) function, and then find the level(s) of ? that satisfies the
first-order and second- order conditions for the minimisation of Wayne’s AC. [ 4 ]
.
1.1b Show that AC is equal to marginal cost (MC) at the level(s) of ? that minimises AC. [ 2 ] 1.2 Dunder Mifflin produces and sells nails. Its production function is ? = ?𝑳
?.?
, while it can sell nails at
? = ? . Furthermore, its short-run cost function is ? = ?𝑳 . Find the value(s) of 𝐿 that satisfies the first-order
and second- order conditions for the maximisation of Dunder Mifflin’s profit. [ 6 ]
1.3 The demand for (a pocket of) apples is ?
1