Question

Suppose a firm faces a cost function of c= 8+4q+q².

a. What is the firm's fixed cost

b. Drive an expression for the firm's average variable fixed cost

Answer 1

a) The firm's fixed cost:

FC = 8

b) Average variable cost:

=$\frac{total variable cost}{Q}$

=$\frac{4q+q^{2}}{q}$

$AVC=4+q$

Average fixed cost:

=$\frac{totalfixedcost}{q}$

AFC = $\frac{8}{q}$