Question

The short-run cost function of a company is given by the equation TC=10000+50q, where TC is the total cost and q is the total quantity of output.

a. What is the company's fixed cost?
b. If the company produced 2,000 units of goods what would be its average variable cost?
c. What would be its marginal cost of production?
d. What would be its average fixed cost?
e. Suppose the company borrows money and expands its factory. Its fixed cost rises by $5,000 but its variable cost falls to $45/unit. The cost of interest also enters the equation. Each 1 point increase in the interest rate raises costs by $250. Write the new cost equation.

Answer 1

a. 10000

b. 50

c. 50

d. 5

e. TC = 15000+5Q+250r

Step-by-step explanation:

TC = 10000+50Q

a. the fixed cost Is 10000

b. variable cost, VC = 50Q

at q =2000 units,

average variable cost =
`(VC)/(Q)`

= 50Q/Q

= 50

C. Marginsal cost = d(tc)/dq = 50

d. the average fixed cost = 10000/q

= 10000/2000

= 5

e. the final cost would be = 10000+5000= 15000

the variable cost woul be calculated as= (50-45)Q = 5Q

Interest rate = 250r

the new cost equation = TC = 15000+5Q+250r