11. unit versus marginal cost Return to problem 3-14, but now assume Ralph wants to produce q1 = 100 and q2 = 200.

(a) Determine Ralph’s best combination of capital and labor, as well as the total cost of production.

(b) Determine the marginal cost of each product (given the above output schedule).

(c) Provide an accounting method such that the resulting unit cost of the first product well approximates its marginal cost. For this purpose, notice three “cost pools” are present: direct cost for the first product (i.e., 150L1), direct cost for the second product

(i.e., 175L2) and an indirect, product cost pool, or overhead (i.e., 100K). Does the second product’s unit cost provide a reasonable estimate of that product’s marginal cost? Explain.