Question

An economist estimated that the cost function of a single-product firm is: C(Q) = 100 + 20Q + 15Q2 + 10Q3. Based on this information, determine the following: a. The fixed cost of producing 10 units of output.

Answer 1

The fixed cost of producing 10 units of output is $12,100.

Step-by-step explanation:

The fixed cost of producing 10 units of output can be determined by evaluating the cost function at Q = 10.

To find the fixed cost, we need to determine the coefficients of the Q terms that have exponents greater than 0. In this case, we have Q, Q^2, and Q^3 terms with coefficients of 20, 15, and 10 respectively.

Since Q = 10, the fixed cost is calculated as follows:

Fixed Cost = 100 + 20(10) + 15(10^2) + 10(10^3)

Fixed Cost = 100 + 200 + 1500 + 10000

Fixed Cost = 12100

Therefore, the fixed cost of producing 10 units of output is $12,100.