Question

A firm has the following total cost function 𝑻𝑪 = 𝟏𝟎𝟎𝒒 − 𝟓𝒒² + 𝟎. 𝟓𝒒^3.

a. Find the average cost function.

Answer 1

Firstly find the MC. It will be MC = $− 10 \cdot𝒒 + 1. 𝟓 \cdot𝒒^2.$

Than we make MC = 0, so $− 10 \cdot q + 1. 5 \cdot q^2 = 0 .$

q = 6,6. So it was found equilibrium q.

Then use formula AC = TC/q.

TC = 585

Q = 6,6

AC = 88,78