Question

Given the following total cost function TC(q) = 1000 + 13q. Find the fixed cost, variable...

  1. Given the following total cost function TC(q) = 1000 + 13q. Find the fixed cost, variable cost, average total cost, and the marginal cost. How do you know that these costs are in the short-run? Explain.

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Answer #1

fixed cost:

FC=the cost is same at all level, and it is equal to the total cost at Q=0

FC=$1000

variable cost:

VC=TC-FC

VC=1000+13q-1000=13q

Variable cost is 13q.

average total cost:

Average total cost =total cost /q=(1000+13q)/q=1000/q+13

the marginal cost:

Marginal cost is a change in total cost and a change in function found by differentiation.

MC=13

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How do you know that these costs are in the short-run

The total cost function has a constant term and that we call fixed cost. A fixed cost is in the only short run because fixed cost is a cost of fixed input. A short run is a situation where one of the input is fixed.

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