Question

A firm has cost function C = 12 - 24Q + 36Q2. The firm is producing 6 units of output Calculate values for these: a) total cost b) total fixed cost c) total variable cost d) average total cost e) average fixed cost average variable cost g) marginal cost (Clearly label each answer and show all calculations that you do, or you will receive no credit for your answers.)

Answer 1

Answer

C= 12-24Q+36Q^2

Q=6

When Q=6,
Total Cost(TC) = 12-24(6)+36(6)^2=1164.

Total Cost =Total Fixed Cost+ Total Variable Cost

Fixed Cost is the component of TC which is invariant of output, whereas Variable cost changes with Q

therefore, in our case, Fixed Cost =12 and Total Variable Cost=36Q^2-24Q=36*6^2-24*6=1152

Total Fixed Cost=12

Total Variable Cost=1152

Average Total Cost = Total Cost/Q = 1164/6=194
Average Fixed Cost = Fixed Cost/Q = 12/6=2
Average Variable Cost = Total Variable Cost/Q = 1152/6=192

Marginal Cost=dTC/dQ = -24+72Q=72Q-24