Smarty’s Dish company manufactures household and commercial satellite dishes according to the production function. C(Q1, Q2) = 100 + 5Q1 + 2Q2 + .5Q1Q2 Where Q1 and Q2 are household and commercial satellite dishes produced in a day, respectively. Suppose Smarty produces 10 household dishes and 8 commercial dishes per day. Should he divide production into separate facilities? Why? a. No. The firm enjoys cost complementarities b. Yes, because the firm does not realize cost complementarities c. No, because even though the firm does not enjoy cost complementarities, it does realize economies of scope at this level of output. d. Yes, because the firm does not enjoy cost complementarities, and it does not realize economies of scope at this level of output.
4. Smarty’s Dish company manufactures household and commercial satellite dishes according to the production function.
C(Q1, Q2) = 100 + 5Q1 + 2Q2 + .5Q1Q2
Where Q1 and Q2 are household and commercial satellite dishes produced in a day, respectively. Suppose Smarty produces 10 household dishes and 8 commercial dishes per day. Should he divide production into separate facilities? Why?
a. No. The firm enjoys cost complementarities
b. Yes, because the firm does not realize cost complementarities
c. No, because even though the firm does not enjoy cost complementarities, it does realize economies of scope at this level of output.
d. Yes, because the firm does not enjoy cost complementarities, and it does not realize economies of scope at this level of output.
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