Mathematics3

# Mathematics3 - A firm's total cost function is given by the...

This preview shows pages 1–3. Sign up to view the full content.

A firm's total cost function is given by the equation: TC = 4000 + 5Q + 10Q 2 . (1) Write an expression for each of the following cost concepts: a. Total Fixed Cost b. Average Fixed Cost c. Total Variable Cost d. Average Variable Cost e. Average Total Cost f. Marginal Cost PART (1) a. TFC = 4000 b. AFC = Q 4000 c. TVC = TC - TFC TVC = 5Q + 10Q 2 d. AVC = Q TVC = Q 10Q 5Q 2 = 5 + 10Q e. ATC = Q TC = Q 10Q 5Q 4000 2 f. MC = 5 + 20Q (2) Determine the quantity that minimizes average total cost. Demonstrate that the predicted relationship between marginal cost and average cost holds. PART (2) ATC is minimized where MC is equal to ATC. Equating MC to ATC

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Q 10Q 5Q 4000 2 = 5 + 20Q 4000 +5Q + 10 2 = 5Q + 20Q 2 4000 = 10Q 2 Q 2 = 400 Q = 20 ATC is minimized at 20 units of output. Up to 20, ATC falls, while beyond 20 ATC rises. MC should be less than ATC for any quantity less than 20. For example, let Q = 10:
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 06/04/2011 for the course ECONOMICS 435 taught by Professor Mcin during the Spring '10 term at Central Lancashire.

### Page1 / 5

Mathematics3 - A firm's total cost function is given by the...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online