Re: Marginal analysis. Help

Posted by eco aspirant on Jun 09, 2017; 6:19pm
URL: http://discussion-forum.276.s1.nabble.com/Marginal-analysis-Help-tp7605249p7605250.html

Since at zero level of output, there is a loss of 10. Therefore, each plant will try to minimize their respective loss incurred due to production. According to the given schedule, this occurs at 3 units of output where
loss made by each plant = total cost - total revenue
                                    = 22 - 7*3 = 22-21 = 1

Note that at any other level of output, each plant incurs a much greater loss. So, at q = 3 loss is minimized.