Task: Carlton Industries, a manufacturer of electronic equipment, estimates the following relation between its marginal cost of production output:
MC = $150 + 0.005Q
1) What does this MC function imply about the effect of the law of diminishing returns on Carlton's short-run cost function?
2) Derive the marginal cost of production at 1,500, 2,000, and 3,500 units of output.
3) Assume Carlton 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 (P = MR = $175)?
4) Present Carlton's short-run supply curve for its electronic equipment (Hint: Recall that a supply curve is of the form: Qs = ?(P )).