Question

6. You're investigating the possibility of starting your own economics tutoring service. You estimate that your costs as a function of the number of hours you provide would be given by TC = 392 - 1592 +30 +20. a. What is your estimated variable cost function? (2 points) e service. You VC = b. What are your fixed costs? (2 points) FC = 7. Afirm's total costs are given by TC = 4q2-242 +444+52. a. What is the firm's average total cost function? (2 points) ATC= b. What is the firm's average variable cost function? (2 points) AVC = 8. What is the term for the situation in which Long-Run Average Cost decreases as the quantity produced increases? (2 points)

Answer 1

Ans 6)

$TC = 3q^{3} - 15q^{2} + 30q + 20$

Variable cost is the cost that varies with quantity "q"

Here,

$VC = 3q^{3} - 15q^{2} + 30q$

and therefore, Fixed Cost is the cost that remains fixed and does not change with quantity

$FC = 20$

Ans 7)

$TC = 4q^{3} - 24q^{2} + 44q + 52$

ATC = TC/q

$ATC = TC/q = (4q^{3} - 24q^{2} + 44q + 52)/q$

$= (4q^{2} - 24q + 44 + 52/q)$

$VC = 4q^{3} - 24q^{2} + 44q$

$AVC = (4q^{3} - 24q^{2} + 44q)/q$

$AVC = 4q^{2} - 24q + 44$

Ans 8)

Economies of Scale