Question

In a certain industry, the supply curve of any rm is si (p) = p=2. if a rm produces 6 units of output, what is its total variable costs?

(a) $72
(b) $34
(c) $54
(d) $36
(e) there is not enough information given to determine total variable costs

Answer 1

To calculate the total variable costs for a firm producing 6 units of output with the supply function si(p) = p/2, we find that the price per unit at 6 units is $6. The total variable costs are therefore 6 units multiplied by $6, which equals $36.

Step-by-step explanation:

The question pertains to economics, specifically to the supply curve and total variable costs for a firm in a certain industry. The equation given for the supply curve is si(p) = p/2. To find the total variable costs for producing 6 units of output, we need to use this supply function. The firm’s supply curve is also its marginal cost curve, which means the marginal cost for each additional unit is equal to the price at which that unit is supplied. Since the firm is producing 6 units, the price can be found by plugging the quantity into the inverse supply function. Thus, the total variable cost equals the quantity produced multiplied by the unit price that corresponds to that quantity on the firm's supply curve.

Let's perform the calculation:

• Find the price: si(6) = p/2 -> p = si(6) * 2.
• Since si(6) = 6/2 = 3, it follows that p = 6.
• Total variable cost (TVC) = p * quantity supplied (Qs) = 6 * 6 = 36.

Therefore, the total variable costs for the firm producing 6 units of output is $36.