Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + ...
Question:
Suppose that each firm in a competitive industry has the following costs:
Total cost: TC = 50 + q{eq}^2 {/eq}
Marginal cost: MC = q
where q is an individual firm's quantity produced.
The market demand curve for this product is Demand: QD = 120 - P
where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market.
a. What is each firm s fixed cost? What is its variable cost? Give the equation for average total cost.
b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity?
Variable Cost
The expenses that continuously change with the change in the output produced are called the variable cost. It is directly proportional to the change in quantity. It is zero at the zero level of output.
Answer and Explanation: 1
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View this answer(a) The total cost is the combination of both the fixed as well as a variable cost. Thus, from the TC function, the firm's fixed cost = 50 and the...
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Average Total Cost: Definition & Formula
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Chapter 3 / Lesson 23
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