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Question 3.(12 points). Suppose a firm has a short-run cost function: C(q) = 1000 + 2009 - 5q2 + 0.573. What are the fixed co
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Answer #1

Ans:

Fixed cost ( F) = 1000

Variable cost Function ( VC) = 200q - 5q2 + 0.5q3

Marginal Cost ( MC) = 200 - 10q + 1.5q2

Average cost ( AC )= (1000 + 200q - 5q2 + 0.5q3 ) / q = 1000/q + 200 - 5q + 0.5q2

Average fixed cost ( AFC) = 1000 /q

Average variable cost ( AVC) = ( 200q - 5q2 + 0.5q3 ) / q = 200 - 5q + 0.5q2

Explanation:

Fixed cost are available even at zero level of output and remain constant throughout the subsequent level of production.

MC = Change in Total cost / Change in quantity

AC = Total cost / Quantity

AFC = Total fixed cost / quantity

AVC = Total variable cost / quantity

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