Question

The short-run cost function of a company = TC=200+55y( tc,y measured in thousands)

a) what is the fixed cost ?

b) ıf the company produces 100.000 units of output, what would be the AVC ?

c) what would be its marginal cost (y=100.000)

d) what would be its average fixed cost (y=100.000)

e)suppose that company expounds, its production capacity, therefore, fixed cost increases by $50.000, but its variable cost falls to $ 45.000 per1000 units write the new cost equation?

f)Suppose the company borrows money and expands its factory. Its fixed cost rises by $50.000, but its variable cost falls to $45.000 per 1000 units. The cost of interest ( ) also enters into the equation. Each 1 -point increase in the interest rate raises costs by $3000 Write the new cost equation

Answer 1

a) what is the fixed cost ?

$FC = 200$ (in thousands)

b) ıf the company produces 100.000 units of output, what would be the AVC ?

The variable cost here is $55y$

$AVC =\frac{\Delta VC}{Y} =\frac{ 55y}{100}=0.55y$

c) what would be its marginal cost (y=100.000)

TC=200+55y

$MC = \frac{\Delta TC}{Y} = 55$ (in thousands)

d) what would be its average fixed cost (y=100.000)

$AFC = \frac{\Delta FC}{Y} = \frac{200000}{100}= 2000$

e)suppose that company expounds, its production capacity, therefore, fixed cost increases by $50.000, but its variable cost falls to $ 45.000 per1000 units write the new cost equation?

$TC = 250+45y$