The demand function for a firm’s product is given by P = 60 − Q. Fixed costs are 100, and the variable costs per good are Q + 6.

(a) Write down an expression for total revenue, TR, in terms of Q and sketch a graph of TR against Q, indicating clearly the intercepts with the coordinate axes.

(b) Write down an expression for total costs, TC, in terms of Q and deduce that the average cost function is given by AC = Q + 6 + 100/Q Copy and complete the following table of function values:

Draw an accurate graph of AC against Q and state the value of Q that minimises average cost.

(c) Show that the profit function is given by π = 2(2 − Q)(Q − 25) State the values of Q for which the firm breaks even, and determine the maximum profit.

Transcribed Image Text:

2 5 15 10 20 58 AC