# When a factory is operating in the short run.

9. When a firm is operating in the short run

Option D.it cannot change its quantity of fixed input.

In the short run the firms cannot change the fixed input. While in the long run it can change all the inputs.

10. The MC curve always intersects the ATC at the minimum of the ATC.

True.

11. If the marginal cost exceeds the Minimum average variable cost then AVC must be rising.

True.

12. If LAC is rising then it exhibits

Decreasing returns to scale.

13 to 16.

Note: Q1 + Q2 = 8

=> Q1 = 8 - Q2

Plug in this in the TC function

We have to minimize the TC function. Differentiating TC wrt Q2 we get

MC = - 1.2 + 0.6Q2

Now equate it to zero

- 1.2 + 0.6Q2 = 0

=> 0.6Q2 = 1.2

=> Q2 = 2 units

Hence, Q1 = 8 - Q2 = 8 - 2 = 6 units

13. Q1 = 6; Q2 = 2

14. $7.20 15.$ 4.40

16. $11.60 Q1 = 6 and Q2 =2 Plant 1 TC = Q1 × ATC1 = Q1 × 0.2Q1 = 6 × 0.2×6 =$ 7.20

Plant 2, TC2 = (2 + 0.1Q2)Q2 = (2 + 0.1×2) ×2 = (2+0.2)×2

= $4.40 TC = 7.20 + 4.40 =$ 11.60