A statistical cost analysis has revealed that Robertson Rotorcraft Company’s long-run cost is: ??(?)=0.0004?3−0.48?2_+432?, where ?...

A statistical cost analysis has revealed that Robertson Rotorcraft Company’s long-run cost is: ??(?)=0.0004?3−0.48?2_+432?, where ? is the number of helicopters it produces per year and ? is its (total) cost in thousands of dollars. This implies that the firm’s long-run marginal cost is ??(?)=0.0012?2−0.96?+432. This year, due to short-run commitments and standing contracts with suppliers, the firm’s short-run cost has been estimated as ??(?)=0.0012?3−1.2?2+432?+86,400, which implies the short-run marginal cost ??(?)=0.0036?2−2.4?+432. All costs are expressed in thousands of dollars. Let ? be the price at which the company sells helicopters. a) What is this firm’s minimum efficient scale of production (MES)? b) How low can the price ? go before it is optimal for the firm to shut down in the short run (this year)? c) If the firm expects demand for helicopters to fall to a point where it will no longer be possible to sell helicopters for a price higher than $250,000 for the foreseeable future, should this firm plan to shut down in the long run (next year and beyond)?

I attempted a) MES=600. b) price $132. c) not sure

Can you tell me if my answers a) and b) are correct and also can you help with c)

Expert Solution

Rahul Sunny answered 7 months ago

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