Shridhara Kollur :- Lesson #1, Assignment #4 Average Cost Minimization. Better Buys, Inc., is a leading discount retailer of wide-screen digital and cable-ready plasma HDTVs. Revenue and cost relations for a popular 55-inch model are: TR = $4,500Q - $0.1Q2 MR = ATR/ AQ = $4,500 - $0.2Q TC = $2,000,000 + $1,500Q + $0.5Q2 MC = ATC/ AQ = $1,500 + $1Q A. Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level. To find the average cost-minimizing level of output, set MC = AC and solve for Q. Since, AC = TC/Q = $2,000,000 + $1,500Q + $0.5Q= / Q = $2,000,000Q-1+$1,500+$0.5Q MC=AC, $1,500 + $1Q=$2,000,000Q-1+$1,500+$0.5Q 0.5Q=$2,000,000/Q Q*Q=$2,000,000/0.5 =4000000 Q=2000 MC=$1,500 + $1*2000=$1,500+$2,000=$3,500 AC=$2,000,000/$2,000+$1,500+$0.5*2000=$1,000++$1,500+1000=$3,500 P=TR/Q =$4,500Q - $0.1Q3 /Q = $4,500-$0.1Q=$4,500-$0.1*2000=$4,300 TC=$2,000,000 + $1,500*2000+0.5*2000*2000=$2,000,000 +3000000+ $2000000=$7000000 Pi = P x Q- TC=$4,300*$2,000-$7000000=$8600000-$7000000=$1,600,000