Question

Output TFC($) TVC($) TC ($) (Q) 140 263 388 100 100 100 100 100 100 240 363 488 615 744 875 515 644 775 Given the information about short-run costs in the table above, we can conclude that the firm will minimize the average total cost of production when Q = (Round your response to the nearest whole number)

Answer 1

Answer : When Q = 2, TC = 240; ATC (Average Total Cost) = TC / Q = 240 / 2 = 120.

When Q = 3, TC = 363; ATC = TC / Q = 363 / 3 = 121.

When Q = 4, TC = 488; ATC = TC / Q = 488 / 4 = 122.

When Q = 5, TC = 615; ATC = TC / Q = 615 / 5 = 123.

When Q = 6, TC = 744; ATC = TC / Q = 744 / 6 = 124.

When Q = 7, TC = 875; ATC = TC / Q = 875 / 7 = 125.

Now we can see that the average total cost is minimum when Q = 2.

So, we can conclude that the firm will minimize it's average total cost when Q = 2.