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Unformatted text preview: What is the value of the elasticity of demand at the revenue maximizing level of output? Q2. A Frm’s total costs (TC) are given by the following expression: TC = 1 3 Q 3-5 Q 2 + 30 Q (a) Derive an expression for the Frm’s average cost (AC) function. (b) Find the output level at which the frm’s average cost is at a minimum. Use the second order condition to veri±y that it is a minimum. (c) What is the value o± average costs at this level o± output? (d) Derive an expression ±or the frm’s marginal cost (MC) ±unction. What is the value o± marginal costs at the output where average costs were minimized above? Q3. Assume the above frm operates in a per±ectly competitive market and is able to sell its output at a price o± $14 per unit. Determine its proft-maximising level o± output using the frst order and second order conditions ±or a maximum....
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- Spring '09