a.

TC = 100 + 60Q - 12Q^2 + Q^3

we know that Total Cost = Total Fixed cost + Total Variable cost

Thus, Total Fixed cost = 100 and Total Variable costs (TVC) = 60Q -
12Q^2 + Q^3

AVC = TVC/Q = 60 - 12Q + Q^2

MC = d(TC)/dQ = 60 - 24Q + 3Q^2

b. At minimum, d(AVC)/dQ = 0 and d2(AVC)/dQ^2 > 0

d(AVC)/dQ = -12 + 2Q = 0 and d2(AVC)/dQ2 = 2 >0

-12 + 2Q = 0 i.e Q = 6

Thus, at Q = 6 AVC is minimum

Similiarly, At minimum, d(MC)/dQ = 0 and d2(MC)/dQ^2 > 0

d(MC)/dQ = -24 + 6Q = 0 and d2(MC)/dQ^2 = 6 > 0

-24 + 6Q = 0 ie Q = 4

Thus, at Q = 4, MC is minimum

Since both AVC and MC have a minima at Q = 6 and Q = 4 respectively,

at all other level of output, the AVC and MC are higher. Thus, its curve will
be in the shape of U

c. AVC is minimum when Q = 6.

AVC= 60 - 12Q + Q^2 = 60 - 12*6 + 6*6 = 60 - 72 + 36 = 24

MC = 60 - 24Q + 3Q^2 = 60 - 24*6 + 3*6*6 = 60 - 144 + 108 = 24

Related Ques