Suppose a firm’s short-run cost curves were found to be: Total Cost = SRTC = 1 + 2Q + Q2 Marginal Cost = SRMC = 2 + 2Q, Where Q is output. Assume the firm behaves as a price taker and sells its output at P = K8 per unit. (a) If the firm maximizes profits, how much will it produce? (b) What are the marginal, average and total cost at that point? (c) What is the firms’ profit?

Given the total cost equation: TC = 144 +2Q+Q² what is the average cost when the firm produces at the level of Q that yields the minimum average cost?

fixed cost is the same at each output level except when no output is produced. when a firm produces no output,there are no fix cost. true or false? explain

Which statement must be false? a)  When a firm has increasing returns to scale in production, its marginal cost curve will be downward sloping. b)  When a firm has constant returns to scale, its total cost curve will be an upward sloping line. c)  When a firm has diminishing returns to scale in production, its average cost curve will be upward sloping. d)  Every firm faces eventually diminishing returns to scale, where its average cost curve reaches its minimum.

c) If a business has a long-run cost (TC) function given by TC = aq° – bq² + cq where q = the rate of output, and a, b and c are all positive parameters, show that average cost is always positive if and only if b² 0.

Consider the following marginal cost function MC= 5 + 2qi. (a) Does the production process exhibits increasing returns? decreasing returns? constant returns? (b) If the price is $23. What’s the optimal production level? (c) If the price is $31. What’s the optimal production level?

A firm with some fixed costs and a constant marginal cost at all levels of production will have which of the following average cost relationships? As production increases, average total cost will:   A remain the same   B decrease   C increase   D decrease and then increase   E increase and then decrease

Increasing returns and imperfect competition: (a) The production function for the word processor is Y = X – 100 million if X is larger than 100 million, and zero otherwise. By spending $100 million, you create the first copy, and then $1 must be spent distributing it (say for the DVD it comes on). For each dollar spent over this amount, you can create another copy of the software. (b) The production function is plotted in Figure 6.5. Output is zero whenever X is less than 100 million. Does this production function exhibit increasing returns? Yes. We spend $100 million (plus $1) to get the first copy, but doubling our spending will lead to 100 million copies (plus 2). So there is a huge degree of increasing returns here. Graphically, this can be seen by noting that the production function “curves up” starting from an input of zero, a common characteristic of production functions exhibiting increasing returns. (Constant returns would be a straight line starting…

Suppose a firm’s total cost curve is TC = 50Q2 + 10Q + 800 and marginal cost is MC = 100Q + 10. Find the output level that minimizes average total cost and average variable cost, respectively.