There are two production technologies available for a new product line. If the firm decides to install technology 1, its costs will be equal to C1(q)=10+2q^(2). If it chooses to install technology 2, its costs will be equal to C2(q)=30+(q^(2)/2)
a) Graph the long - run average cost curve. You can use Excel to draw the graph.
b) Calculate the minimum efficient scale (MES)
c) If the firm expected to sell 10 units in winter each year, which technology would the firm prefer (purely from a cost standpoint)?
d) What is the expected demand which would make the firm indifferent between the two technologies (purely from a cost standpoint)?