Question

If the cost function for a firm is C = 25q2 + 15

a. Calculate the average cost.

b. Calculate the marginal cost.

c. Is this a short-run or long-run cost function? Explain your answer.

Answer 1

A)

We know that the average cost is the cost per unit of output produced. Here given the total cost function, So

  

B)

Now we want to find out the marginal cost function. We know that marginal cost is the additional cost of producing a unit of output. Mathematically, marginal cost is the derivative of total cost function. That is,

C)

This cost function is short run cost function. Because we know that short run is the period of varying all the cost both fixed and variable cost. In the total cost equation we deal with both variable and fixed costs.