Economics of Enterprise Answers

The economist for the Grand Corporation has estimated the company's cost function, us-

ing time series data, to be

TC = 50 + 16Q -20° + 0.20%

where TC = Total cost I

Q = Quantity produced per period

a. Plot this curve for quantities 1 to 10.

b. Calculate the average total cost. average variable cost, and marginal cost for these quan-

tities, and plot them on another graph.

c. Discuss your results in terms of decreasing, constant, and increasing marginal costs.

Does Grand's cost function illustrate all these?

1.    Given the following cost function: TC = 1500 + 15Q – 6Q 2 + Q3               

a.    Determine the total fixed cost for producing 1000 units of output and 500 units of output. 

b.    What is AFC at: 

                                              i.     1000 units of output b) 

                                            ii.     500 units of output iii. 

c.    Determine TVC, AVC, MC and AC at 50 units of output.

1.     In 2012, the box industry was perfectly competitive. The lowest point on the long-run average cost curve of each of the identical box producers was $4, and this minimum point occurred at an output of 1,000 boxes per month. The market demand curve for boxes was                                                                                                                  

where P was the price of a box (in dollars per box) and Q_D was the quantity of boxes demanded per month. The market supply curve for boxes was

Where Q_S was the quantity of boxes supplied per month.

a.     What was the equilibrium price of a box? Is this the long-run equilibrium price?

b.     How many firms are in this industry when it is in long-run equilibrium?

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Firms break even when

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