Question

Given the total cost function; TC = 3Q³ - Q² + 150Q +50

A.           What is the fixed cost and what does it shows?

B.           What is the variable cost function? What is the variable cost at Q = 2?

C.           What is the maximum output level at the minimum level of average variable cost

D.           At Q = 3 what Is the trend of average cost function (is that increasing or decreasing)? Why?

Answer 1

$$FC=50$$

$$VC=3Q^3-Q^2+150Q$$

$$VC\vert_{Q=2}=320$$

$$AVC=\frac{VC}{Q}=3Q^2-Q+150$$

$$\frac{\delta AVC}{\delta Q}=6Q-1$$

$$Q_{min}=\frac{1}{6}$$

$$\frac{\delta AVC}{\delta Q}\vert_{Q=3}=17>0$$

The trend of average cost function is increasing.