Asked by Patel Fenil on May 05, 2024
Verified
The long-run cost function for Jeremy's Jetski Rentals is: 
The long-run marginal cost function is 
If Jeremy can sell as many jetski rentals as he desires at $50, calculate his optimal output in the long run.
Long-Run Cost Function
An economic model that describes how production costs change over time as all inputs can be varied by the producer.
Marginal Cost Function
A mathematical relationship describing how the cost of producing one additional unit of output varies as production scale changes.
Optimal Output
The level of production that maximizes a firm's profit, where marginal revenue equals marginal cost.
- Apply knowledge of cost functions to calculate optimal output and understand its implications on a firm’s profitability.
Verified Answer
At this output level, Jeremy's average costs are: 
Since price exceeds Jeremy's Average costs, Jeremy will maximize profits by producing 10 units of output.
Learning Objectives
- Apply knowledge of cost functions to calculate optimal output and understand its implications on a firm’s profitability.
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