1. Suppose a cost function is defined as C(q) = 8 + 13q + 15q^2 (a) Find the ATC, AVC, AFC and MC (b) Find the minimum of the ATC and plot the functions found in (a) (c) Give an intuitive explanation for the shape of the ATC, MC and explain the relationship between both cost functions.

1. Suppose a cost function is defined as C(q) = 8 + 13q + 15q^2 (a) Find the ATC, AVC, AFC and MC (b) Find the minimum of the ATC and plot the functions found in (a) (c) Give an intuitive explanation for the shape of the ATC, MC and explain the relationship between both cost functions.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Suppose a cost function is defined as
C(q) = 8 + 13q + 15q^2

(a) Find the ATC, AVC, AFC and MC
(b) Find the minimum of the ATC and plot the functions found in (a)
(c) Give an intuitive explanation for the shape of the ATC, MC and explain the relationship
between both cost functions.

Definition Definition Measure of the cost of production per unit of output, including only variable costs such as wages, materials, and utilities. AVC is calculated by dividing total variable cost by the number of units produced. Understanding average variable cost is important for businesses to make decisions on pricing, production levels, and profitability.

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