4. Suppose a short-run total cost function is given by C 100 5090.2 Q4 (a) Find out the fixed cost, variable cost, marginal cost, average variable cost and average total cost .(b) Plot them in a diagram and interpret the relationship between average and marginal cost.

4. Suppose a short-run total cost function is given by C 100 5090.2 Q4

(a) Find out the fixed cost, variable cost, marginal cost, average variable cost and average total cost

.(b) Plot them in a diagram and interpret the relationship between average and marginal cost.

 

 

Answer:

The short run total cost function is given by

C = 100+50Q.2+Q2

In the above function fixed cost is 100 which never varies with respect to changes in Q.

Variable cost is (50Q.2+Q2). it changes over the change in quantity.

Marginal cost = dC/dQ = 10Q-.8+2Q

Average variable cost = (50Q.2+Q2)/Q = (50Q-.8+Q)

Average total cost = C/Q = (100+50Q.2+Q2)/Q

b)

Quantity               MC       FC         VC       AVC        ATC

0                            0

1                           12

2

3

4

5

6

7

8

9

10

Asked on February 15, 2018 in economics.
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