Answer to Question #279156 in Microeconomics for Komathi

Question

The short-run cost function of a company is given by the equation

TC = 200 + 55q

where TC is the total cost and q is the total quantity of output, both measured in thousands.

What is the company’s fixed cost?

If the company produced 100,000 units of goods, what would be its average variable cost?

What would be its marginal cost of production?

What would be its average fixed cost?

Answer 1

Solution:

The company’s total fixed cost = 200,000

Variable cost = 55,000q

Total variable costs = 55 x 100,000 = 5,500,000,000

Average variable cost = Total variable costs $\div$ quantity = 5,500,000,000 $\div$ 55,000 = 100,000

 

Marginal cost = $\frac{\partial TC} {\partial Q}$ = 55,000

Marginal cost of production = 55,000

 

Average fixed cost = Total fixed cost/ quantity = 200,000$\div$ 100,000 = 2