Question

Suppose that cost function is of a firm is given by C=Q³-4Q²+14Q+60. Then ,determine

a. Fixed Cost function and AFC at Q=2

b. TVC function and AVC at Q=2

c. MC function and MC at Q=2

d. Minimum average cost

Answer 1

a. Fixed Cost function and AFC at Q=2

Fixed cost function; C=60

$AFC=\frac{Fixedcostfunction}{q}=\frac{60}{2}=30$

b. TVC function and AVC at Q=2

TVC=Q³-4Q²+14Q

$AVC=\frac{TVC}{Q}=\frac{Q^3-4Q^2+14Q}{Q}=Q^2-4Q+14$

$AVC=2^2-4\times2+14=18$

c. MC function and MC at Q=2

$MC=\frac{\Delta C}{\Delta Q}=3Q^2-8Q+14$

$MC=3(2)^2-8(2)+14=10$

d. Minimum average cost

$=\frac{\Delta TC}{\Delta Q}$

$=\frac{\Delta Q^3-4Q^2+14Q+60}{\Delta Q}$

$=Q^2-4Q+14+\frac{60}{Q}$