Discuss the following three cost functions:
TC = 20 + 4Q
TC = 20 + 2Q + 0.5Q2
TC = 20 + 4Q- 0.1Q2
a. Calculate all cost curves:
• Total cost
• Total fixed cost
• Total variable cost
• Average total cost
• Average fixed cost
• Average variable cost
• Marginal cost
b. Plot these curves on graphs.
c. Compare the shapes of these curves and discuss their characteristics. (Particularly interesting should be the last cost function, whose shape is often found in engineering cost studies.)