Wastberg produces its highend Irving desklamps in two facili

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.

Solution

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