In: Economics
Calculate minimum efficient scale for a firm with the following cost and demand curves:
Q(P)= 343-7P
C(Q)= 311040+.0005Q4
Q(P) = 343 - 7P
P = 49 - Q/7
The marginal cost is given by:
dC/ dQ = 0.002 Q3
At minimum efficient scale, the price is equal to the marginal cost.
49 - Q/7 = 0.002 Q3
0.014 Q3 + Q - 49 = 0
Q = 11.56
The minimum efficient scale is at Q = 11.56.