Question

Suppose Farmer Bridget’s total cost of producing B bushels of bananas is described by the equation...

  1. Suppose Farmer Bridget’s total cost of producing B bushels of bananas is described by the equation
    TC= 60+ B2.  
    1. What is an equation for Farmer Bridget’s average fixed cost curve? Is it increasing or decreasing? Explain.
    2. What is an equation for Farmer Bridget’s average variable cost curve? As bushels of output increase is it increasing at a decreasing, constant, or increasing rate? Explain.
    3. What is an equation for Farmer Bridget’s marginal cost curve? As bushels of output increase is it increasing at a decreasing, constant, or increasing rate? Explain.
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Answer #1

We have the total cost of producing B bushels of bananas TC= 60+ B2.  

Average fixed cost curve has an equation FC/Q. Here FC is 60 so AFC = 60/B. AFC decreases continuously because numerator is fixed by denominator rises. Hence overall fraction declines as Q rises.

Average variable cost curve has an equation B^2/2 = B.  As bushels of output increase it is increasing since it is equal to the number of bushels produced.  

Marginal cost curve has an equation MC = Derivative of TC = 2B. As bushels of output increase it is increasing since it is equal to the twice the number of bushels produced.  

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