Q: Suppose a firm's total cost function is TC = 16 + 5Q + 4Q2 ....

Question

Question

Q: Suppose a firm's total cost function is TC = 16 + 5Q + 4Q2 . What is the output level that minimizes average total cost?

Answer 1

Answer #1

TC = 16 + 5Q + 4Q²

Dividing the whole equation by Q

ATC = TC / Q = (16 + 5Q + 4Q² ) / Q

Differntiating TC with respect to Q to get MC

MC = 5 + 8Q

Equating MC = ATC for finding qty at which ATC minimizes

5 + 8Q = (16 + 5Q + 4Q² ) / Q

5Q + 8Q² = 16 + 5Q + 4Q²

4Q² = 16

Q² = 4

Q = 2

Answer 2

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