For Insomnia Cookies, the total cost of producing cookies, k and frosting, f, jointly is given by
TC = 100 + 50kf – (kf)0.5.
The total cost of producing k and f in two different factory locations is given by
TC = 75 + 3,000k + 1,000Q2 + k2 + f2.
If the firm produces k = 40 and f = 100, then how much more expensive or cheaper in percentage terms is it to produce together? If it's more expensive, put a negative sign in front of your answer. You may answer either as a decimal or a typical percentage (rounded to two decimal places in either case).
Q stands for quantity
We simply substitute the values of k = 40 and f = 100 in the Total Cost Functions. We get Q for the second TC equation by adding k and f.
The % change is calculated. The working has been shown below.
It is 26.37% cheaper to produce jointly than producing separately.
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