The cost function (monthly) for your company can be defined as; TC = cost per unit (AC)
Question:
The cost function (monthly) for your company can be defined as; TC = cost per unit (AC) * quantity supplied (Q). If the cost per unit (average cost) for your firm is AC = (800/Q) – 10 +2Q:
a. What is the total cost function for your firm in terms of Q?
b. How would you interpret the intercept term in this function?
c. What is the marginal cost function for your firm?
d. At what level of output (Q) is AC minimized?
e. Is MC always less than AC?
f. Combine the total revenue function from problem 1 and total cost function from this problem and derive the profit-maximizing level of output and the price that would be charged.
g. Why is the output level at this point smaller than the output level that maximizes total revenue?
Basic Marketing Research
ISBN: 978-1133188544
8th edition
Authors: Tom J. Brown, Tracy A. Suter, Gilbert A. Churchill