b.
To determine how many accounts will minimize the long run average cost.
Given the function;
[tex]C=576-48N+N^2[/tex]
We need to plot a graph of the function and identify the lowest point on the graph ( since we are minimizing).
Above is a section of the graph of the function.
The lowest point on the graph is at;
[tex]\begin{gathered} N=24 \\ C=0 \end{gathered}[/tex]
Therefore, the number of accounts that will minimize the long run average cost is 24 accounts.
Also, the minimum long run average cost is 0
c.
We want to determine whether the territories should be merged together.
To do this we will check their average long run cost when they merge and compare to their average long run cost when they are separate;
When the merge, the total number of accounts is;
[tex]N=16+19=35[/tex]
So, the long run average cost is;
[tex]\begin{gathered} C=576-48N+N^2 \\ C=576-48(35)+35^2 \\ C=121 \end{gathered}[/tex]
When they are separate, as calculated in a.
the long run average cost for both is;
[tex]\begin{gathered} C_1=576-48(16)+16^2 \\ C_1=64 \\ C_2=576-48(19)+19^2 \\ C_2=25 \\ C=C_1+C_2=64+25 \\ C=89 \end{gathered}[/tex]
So, since the long run average cost for when they merge is greater that the total long run average cost when the are separate, then they should not merge the two territories because merging the two territories increases the long run average cost. And we all know the aim is to always try to reduce cost.
Therefore, they should not merge
