Multiple choice

The variable cost (V) of manufacturing a product varies according to the equation V= 4q, where q is the quantity produced. The fixed cost (F) of production of same product reduces with q according to the equation F = 100/q. How many units should be produced to minimise the total cost (V + F)?

  1. 5

  2. 4

  3. 7

  4. 6
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A Correct answer
Explanation

Total cost C = V + F = 4q + 100/q. To minimize, set dC/dq = 0. 4 - 100/q^2 = 0, so 4 = 100/q^2, q^2 = 25, q = 5.

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