The minimum production cost of company 2 is greater than the minimum production cost of company 1. We arrived at this value by comparing the production cost of both companies.
What is meant by minimum production cost?
The overall cost incurred by a company to manufacture a product or provide services is known as the cost of production.
The objective of every company is to keep this cost at minimum, hence the minimum production cost.
How do find minimum Production Cost?
Recall that the production function is given as:
f(x) = 0.25x² - 8x + 600
Inserting the values given by the schedule we have
- f(6) = 0.25(6²) - 8(6) + 600 = 561
- f(8) = 0.25(8²) - 8(8) + 600 = 552
- f(10) = 0.25(10²) - 8(10) + 600 = 545
- f(12) = 0.25(12²) - 8(12) + 600 = 540
- f(14) = 0.25(14²) - 8(14) + 600 = 537
For company 2, we are given the various production costs as;
x - g(x)
6 - 862.2
8 - 856.8
10 - 855
12 - 856.8
14 - 862.2
Juxtaposing the above, we can infer that the minimum production cost of company 2 is greater than the minimum production cost of company 1.
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