I have struggled to understand the answer of part b, please explain the part b, and also why when mc1 less than mc2 at lets say when q=8, why s=is in a we have to give some output too mc2? why cant let all 8 goes to mc1? step by step explanations please, thanks is that 2 in mc2 a fixed cost?

How to read the graph: Imagine you need to produce a certain number of units. You start with 0 units and pick the process with lower marginal costs to make the rst one. in our case it is process 1. Then, you think about producing the second unit and you again choose which process to use. However, you need to take into account that you are already using the 1st process to produce one unit. Therefore, you need to compare the marginal cost of making another unit using the 1st process to the marginal cost of producing a unit using process2. In our case, process}! is still more attractive. lfyou solve Q1 + Q2 = 5 and 0.4Q1 = 2 + 0.2Q2 you shouldgetQ1 = 5 and Q2 = 0 which is greater than required total output of 4. This confirms the conclusion from the graph. $fQ MCI MC2 * A rm has access to two production processes with the following marginal cost curves: MC1 = 0.401 and MCZ = 2 + 0.202. a. If it wants to produce 8 units of output, how much should it produce with each process? b. If it wants to produce 4 units of output? ANS BEER: a. The firm minimises costs when it distributes production across the two processes so that marginal cost is the same in each. If 01 denotes production in the rst process and (22 is production in the second process, we have Q1 + Q2 = 8 and 0.4Q1 = 2 + 0.2Q2, which yields 01 = 6, Q2 2 2. The common value of marginal cost will be 2.4. b. Note that for output levels less than 5, it is always cheapest to produce all units with process 1(see the graph below}. Therefore, the solution is Q1 = 4, 02 = 0