Here, cost function is given as:TC=32Q3–10Q2+200Q
A) Using given information, FC would be 50 as it is a constant in the total cost function that is not dependent on output. If FC is zero, total cost will be equal to variable cost. Therefore, VC would be:
VC=32Q3–10Q2+200Q
B) Similarly, AVC would be:
VC=32Q3–10Q2+200QAVC=QVC=32Q2–10Q+200
AFC would be:
FC=50AFC=QFC=Q50
ATC would be:
TC=32Q3–10Q2+200QATC=QTC=32Q2–10Q+200+Q50
MC would be:
TC=32Q3–10Q2+200QdQdTC=2Q2−20Q+200
C) At the minimum of AVC, derivative of AVC will be zero such that:
AVC=32Q2–10Q+200dQdAVC=34Q−100=34Q−1010×43=Q7.5=Q
At quantity of 7.5, minimum AVC would be:
AVC=23Q2−10Q+200AVC=32(7.5)2−10(7.5)+200AVC=37.5−75+200AVC=232.5
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