Kelson Electronics, a manufacturer of VCRs, estimates the following relation between its marginal cost of production and monthly output: MC = $150 + 0.005Q
1) What does this function imply about the effect of the law of diminishing returns on Kelson's short run function?
2) Calculate the marginal cost of production at 1,500, 2,000, and 3,500 units of output.
3) Assume Kelson operates as a price taker in a competitive market. What is this firm's profit maximizing level of output if the market price is $175?
4) Compute Kelson's short run supply curve for its product.