To minimize the cost of producing a given level of output in the long run, a firm must: A) equate the marginal products of all factors of production B) take into account the fixed factors of production C) equate the average cost of all factors of production D) follow the marginal decision rule and equate the ratio of marginal product to price for all factors of production.
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Step 1: To minimize the cost of producing a given level of output in the long run, a firm must follow the marginal decision rule and equate the ratio of marginal product to price for all factors of production. Show more…
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$\begin{array}{l}{\text { (a) If } C(x) \text { is the cost of producing } x \text { units of a commodity, }} \\ {\text { then the average cost per unit is } c(x)=C(x) / x . \text { Show }} \\ {\text { that if the average cost is a minimum, then the marginal }} \\ {\text { cost equals the average cost. }}\end{array}$ $\begin{array}{l}{\text { (b) If } C(x)=16,000+200 x+4 x^{3 / 2}, \text { in dollars, find (i) the }} \\ {\text { cost, average cost, and marginal cost at a production }} \\ {\text { level of } 1000 \text { units; (ii) the production level that will }} \\ {\text { minimize the average cost; and (iii) the minimum aver- }} \\ {\text { age cost. }}\end{array}$
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