Question

A firms short run cost function is C(q)=200q-6q ²+0.3q³+400. Determine the fixed cost,F;the average variable cost,AVC;the average variable cost,AC;the marginal cost,MC;and the average fixed-cost,AFC.

Answer 1

Fixed cost is simply equal to 400 which has no variable.

Average variable cost is equal to the variable cost divided by quantity. That is:

$Variable cost=200q-6q²+0.3q³$

$AVC=VC/q =(200q-6q²+0.3q³)/q$

$AVC=200-6q+0.3q²$

AFC is simply equal to Fixed cost divided by quantity which in this case Fixed cost is equal to 400. Therefore,

$AFC=FC/q=400/q$

Marginal cost is the derivative of cost function.

$MC=dC/dq=200q-6q²+0.3q³+400$

$MC =200-12q+0.9q²$