e) The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output, both measured in thousands. i. What is the company's fixed cost? ii. If the company produced 100,000 units of goods, what would be its average variable cost? iii. What would be its marginal cost of production? iv. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost of interest (r) also enters into the equation. Each 1-point increase in the interest rate raises costs by $3000. Write the new cost equation.
e) The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output, both measured in thousands. i. What is the company's fixed cost? ii. If the company produced 100,000 units of goods, what would be its average variable cost? iii. What would be its marginal cost of production? iv. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost of interest (r) also enters into the equation. Each 1-point increase in the interest rate raises costs by $3000. Write the new cost equation.
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQ
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Transcribed Image Text:e) The short-run cost function of a company is given by the equation TC = 200 +
55q, where TC is the total cost and q is the total quantity of output, both
measured in thousands.
i. What is the company's fixed cost?
ii. If the company produced 100,000 units of goods, what would be its average
variable cost?
iii. What would be its marginal cost of production?
iv. Suppose the company borrows money and expands its factory. Its fixed cost
rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost
of interest (r) also enters into the equation. Each 1-point increase in the
interest rate raises costs by $3000. Write the new cost equation.
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