Question

Suppose an economist estimated that the cost function for Terry’s frame shop is C(Q) = 100 + 10Q + 20Q2 + 10Q³. Given Terry produces 2 frames, what are the associated variable costs?

Multiple Choice

1.$280.

2. $180.

3. $100.

4. $50.

Answer 1

Upon calculating the variable costs using the provided cost function, excluding the fixed costs, we determine that the variable costs for producing 2 frames are $260, which does not align with any of the multiple-choice answers given.

Step-by-step explanation:

The cost function provided is C(Q) = 100 + 10Q + 20Q² + 10Q³. To find the variable costs associated with the production of 2 frames, we will plug Q = 2 into the cost function without including the fixed costs, which are given at zero production. Therefore, the calculation will exclude the constant term (100 in this case), as it represents fixed costs.

Let's calculate the variable costs:

This total does not match any of the multiple-choice answers provided, indicating a possible error in the question or the multiple-choice options. However, based on the provided cost function, we have found the variable costs to be $260 when Q = 2.