The Warren & Smith Company manufactures commercial zippers of two kinds, kind X and kind Y. Its production department estimates that the average-cost function of the firm is
AC= X2+2Y2-2XY-2X-6Y+20
a. How many units of X and Y should management produce if the firm expects an order that would require a total output of 6 units of both kinds of zippers (i.e. X+Y=6). (Use the Langrangian multiplier to solve the problem).
b. What is the AC when the firm produces the units of X and Y you obtained in (a).
c. Determine and interpret the value of λ and interpret its meaning.