Given TC = 120 + 50Q – 10Q2 + Q3 Find a. The equations of the TVC, AVC, and MC functions. b. The level of output at which AVC and MC are minimum, and prove that the AVC and MC curves are U-shaped. c. Find the AVC and MC for the level of output at which the AVC curve is minimum.

Given TC = 120 + 50Q – 10Q2 + Q3 Find a. The equations of the TVC, AVC, and MC functions. b. The level of output at which AVC and MC are minimum, and prove that the AVC and MC curves are U-shaped. c. Find the AVC and MC for the level of output at which the AVC curve is minimum.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis

Section: Chapter Questions

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

Given TC = 120 + 50Q – 10Q² + Q³
Find
a. The equations of the TVC, AVC, and MC functions.
b. The level of output at which AVC and MC are minimum, and prove that the AVC and
MC curves are U-shaped.
c. Find the AVC and MC for the level of output at which the AVC curve is minimum.

Definition Definition Measure of the cost of production per unit of output, including only variable costs such as wages, materials, and utilities. AVC is calculated by dividing total variable cost by the number of units produced. Understanding average variable cost is important for businesses to make decisions on pricing, production levels, and profitability.

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