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A firm is planning to build one of two types of plant. The short-run cost of a type A plant is CA = .5Q'A. Plant
A firm is planning to build one of two types of plant. The short-run cost of a type A plant is CA = .5Q'A. Plant B's short-run cost is CB = 50 + Q-B. a. If an output of 8 units is planned, which plant should be built? How large an output is needed to justify building plant A? b. Suppose the firm already has built both plants. If a total planned output is sufficiently large, the firm should use both facilities. Explain why. Suppose planned production is 22 units. How should the firm divide production between the plants to minimize total cost
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