Question

A power plant’s fuel costs are given by: TC=10+4Q+2Q^2. Here Q represents kilowatt-hour of electricity produced. The firm can sell electricity on the wholesale market for $20 per kilowatt-hour.

Calculate the total fixed costs, average total costs, and marginal cost functions (you can just use a table for the first 6 values), as well as marginal revenue.

Answer 1

TC = 10 + 4Q +2Q²

TFC = 10 (Total fixed cost is the part of TC which does not depends on the Q)

ATC = TC/Q

ATC = (10 + 4Q +2Q²) / Q

ATC = (10/Q) + 4 + 2Q

MC = 4 + 4Q

Quantity	TFC	TC	ATC	MC
0	10	10
1	10	16	16	6
2	10	26	13	10
3	10	40	13.33	14
4	10	58	14.5	18
5	10	80	16	22
6	10	106	17.67	26

Quantity	PRICE	Total Revenue	Marginal Revenue
0	20	0
1	20	20	20
2	20	40	20
3	20	60	20
4	20	80	20
5	20	100	20
6	20	120	20

Marginal revenue is the change in the total revenue due to change in quantity by an unit.