Question

For the total cos function gives as TC=15+3Q-1.5Q2+7.5Q3-45Q4. Compute the Tfc, Tvc, Afc, Avc and Atc

Answer 1

Solution:

i.). The Total Fixed Cost (TFC) = TC – TVC = (15 + 3Q – 1.5Q² + 7.5Q³ – 45Q⁴) – (3Q – 1.5Q² + 7.5Q³ – 45Q⁴) = 15

The Total Fixed Cost (TFC) = 15

 

ii.). The Total Variable Cost (TVC) = 3Q – 1.5Q² + 7.5Q³ – 45Q⁴

 

iii.). Average Fixed Cost (AFC) = $\frac{TFC}{Q}$ = $\frac{15}{Q}$

Average Fixed Cost (AFC) = $\frac{15}{Q}$

 

iv.). Average Variable Cost (AFC) = $\frac{TVC}{Q} = \frac{3Q - 1.5Q^{2} + 7.5Q^{3} - 45Q^{4} }{Q} = 3 - 1.5Q + 7.5Q^{2} - 45Q^{3}$ 3Q – 1.5Q² + 7.5Q³ – 45Q⁴/Q = 3 – 1.5Q + 7.5Q² – 45Q³

Average Variable Cost (AFC) = $3 - 1.5Q + 7.5Q^{2} - 45Q^{3}$

 

v.). Average Total Cost (ATC) = $\frac{TC}{Q} = \frac{15 + 3Q - 1.5Q^{2} + 7.5Q^{3} - 45Q^{4} }{Q} = \frac{15}{Q}+3 - 1.5Q + 7.5Q^{2} - 45Q^{3}$

Average Total Cost (ATC) = $\frac{15}{Q}+3 - 1.5Q + 7.5Q^{2} - 45Q^{3}$