Question

Given the total cost function TC = 100 + 40Q - 15Q2 + 5Q3, what is...

Given the total cost function TC = 100 + 40Q - 15Q2 + 5Q3, what is Average Total Cost (ATC)?

A. ATC = 40 – 15Q + 5Q2

B.ATC = 40 – 30Q + 15Q2

C.ATC = 100/Q + 40 – 15Q + 5Q2

D.ATC = 10 + 4Q – 1.5Q2 + 0.5Q3

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Homework Answers

Answer #1

Answer: C

Explanation: Fixed cost is the cost which does not depend upon the quantity of goods produced. So, FC = 100 from the above TC function.

AFC = Fixed cost / Q = 100/Q

.

Variable cost is the cost which changes with the change in the units of goods produced. So, according to the given function: Variable Cost = 40Q - 15Q2 + 5Q3

AVC = VC/Q = 40 - 15Q +5Q2

Calculate the Average Total Cost ATC, as shown below

ATC = AFC + AVC

ATC = 100/Q + 40 – 15Q + 5Q2

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