Q 4 And Q 6

MG 640 Managerial Economics
Homework Assignment

Week 8 Chapter 5: Production Process and Costs

For this week read Chapter 5, pages 178-198
Answer the following questions:
Question 4. On page 201
Bottom of Form
An economist estimated that he cost function of single-prodcut firm is
C(Q) = 100 + 20Q + 15Q2 + 10Q3
Based on this information, determine:

a. The fixed cost of producing 10 units of output
b. The variable cost of producing 10 units of output
c. The total cost of producing 10 units of output
d. The average fixed cost of producing 10 units of output
e. The average variable cost of producing 10 units of output
f. The average total cost of producing 10 units of output
g. The marginal cost when Q = 10

Question 6. On page 193

A firm’s fixed costs for producing 0 units of output and its average total cost of producing different output levels are summarized in the tale below.

Complete the table to find the fixed cost, variable cost, total cost, average fixed cost, average variable cost, and marginal cost at all levels of output.

Q
FC
VC
TC
AFC
AVC
ATC
MC
0
$15,000

-----

100

$300

200

200

300

175

400

225

500

325

600

400

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ANSWERS:

Question 4:
C(Q) = 100 + 20Q + 15Q2 + 10Q3

a) Fixed cost of producing 10 units of output
FC= $100

b) Variabe cost of producing 10 Units is:
VC = 20(10) + 15(10)2 + 10(10)3
= 200 + 1500 + 10000
= $11700

c) Total Cost of producing 10 Units = VC + FC
= 11700+ 100
= $11800

d) Average FC of producing 10 units = FC/ 10
= 100/10 = 10

e) Average VC of producing 10 units = VC/ 10
= 11700/10 = 1170

f) Average TC of producing 10 units = TC/ 10
= 11800/10 = 1180

g) Marginal cost
MC(Q) = 20 + 30Q + 30Q2
MC(10)= 20 + 300 + 3000
= $3320

Question 6:

Q
FC
VC
TC
AFC
AVC
ATC
MC
0
$15,000
0
15000
-
0
-----
-
100
$15,000