Answer to Question #149539 in Microeconomics for tamiru

Question

If R(Q) = 1000Q - 2Q2
C(Q) = 20Q + 1000
What is the firm's fixed cost?
Firm's marginal revenue (MR), marginal cost (MC) and average cost (AC)
functions?
Using the second-order condition, establish whether the critical value corresponds to a
maximum or minimum.

Answer 1

The firm's fixed cost is FC = 1000.

Firm's marginal revenue is $MR = R'(Q) = 1000 - 4Q,$

marginal cost $MC = TC'(Q) = 20,$ and average cost $AC = TC/Q = 20 + 1000/Q.$

The second-order condition shows that the critical value corresponds to a minimum.