Is it accurate to say that only fixed costs are listed (100)? Also, is it accura
ID: 1155241 • Letter: I
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Is it accurate to say that only fixed costs are listed (100)? Also, is it accurate to say that Q stands for quantity? It is not necessary to provide answers to the problems but if you could tell me what formulas to enter into excel that would be helpful. Thank you
TC 100+600Q-302+0.10 TC 100+ 60Q+32 TC 100 60Q a) Compute the average variable cost, average cost and marginal cost for each function. Plot them on a graph. b) In each case, indicate the point at which diminishing returns occur. Also, indicate the point of maximum cost efficiency (iel the point of minimum average cost) c) For each function, discuss the relationship between marginal cost and average variable cost and between marginal cost and average cost. Also discuss the relationship between average variable cost and average cost.Explanation / Answer
Yes. For all the three equations the fixed cost is 100 and the other cost components are variable costs. Q can be said as quantity
a.AVC = VC/Q
VC = TC-100
AC= TC/Q
For MC, we need to find first order differential order of equations
MC1 = 60-6Q+0.3Q
MC2= 60+6Q
MC3=60
b. Diminishing returns occurs where MC starts to increase, minimum average cost is at the minimum point of AC
c. MC and AVC, both starts to decrease reaches minimum and again increases with the increase in production
MC and AC, both starts to decrease reaches minimum and again increases with the increase in production
AC and AVC, also starts to decrease reaches minimum and increase with the increase in production
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