3. Kelson Electronics, a manufacturer of DVRs, estimates the following relation between its marginal cost of production and monthly output: MC = $150 + 0.005Q

a. What does this function imply about the effect of the law of diminishing returns on Kelson’s short-run cost function?

b. Calculate the marginal cost of production at 1,500, 2,000, and 3,500 units of output.

c. Assume Kelson operates as a price taker in a competitive market. What is this firm’s profit-maximizing level of output if the market price is $175?

d. Kelson’s short-run supply curve for its product.

Requirements: 500-600