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Please check 1-4 and help with 5-9.

STC = 550 +9Q -

.15Q2 +0.005Q3

 

1 Total fixed cost is $__550_______

Fixed cost (FC) is the constant number in the above function

 

2   Obtain the AFC function from (a) and write it here _550/Q________

              AFC = FC/Q

 

3 Obtain the AVC function contained in the STC function and write the AVC function here ___9 - .15Q + 0.005Q2______________________

    TVC = 9Q - .15Q2 + 0.005Q3

                       AVC = TVC/Q

               AVC = (9Q - .15Q2 + 0.005Q3) / Q

 

4 Write here the MC function _ 9 - .3Q + 0.015Q2___________________

                 MC = dSTC/dQ

                 MC = d(550 + 9Q - .15Q2 + 0.005Q3)/dQ

 

5 Find the value which AFC approaches as Q gets very large. 

And does this implies for fixed costs per unit (AFC) as production quantities get ever larger.

 

 

 

 6 Find the value of Q at which AVC is a minimum.

 

7 Is productive efficiency at this value greatest or least?

 

 8 Demonstrate that the value of SMC equals the value of AVC at the value  of Q where AVC is a minimum. Hint: The level of Q you found in (f) is where AVC is a minimum. If you plug this level of Q into AVC (see 3) and also into MC (see 4) the two outcomes should be the same if SMC crosses AVC at this level of Q.

 

 

 

9 Find the value of Q where increasing returns ceases and diminishing returns begins. Hint: Diminishing returns begins at the level of Q where MC is a minimum.

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