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    Characteristics of cost functions: fixed, variable, average and marginal

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    Consider the following variable cost function (where Q = output):
    VC = 200 * Q - 9 * Q^2 + 0.25 * Q^3
    Fixed costs are equal to $150: FC = 150

    A. Determine the total cost function.
    B. Determine the (i) average fixed, (ii) average variable, (iii) average total, and (iv) marginal cost functions.
    C. Determine the value of Q where the marginal cost function takes on its minimum value.

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    Solution Preview

    A. The total cost function is made up of fixed costs + variable costs. Based on the information provided above: TC (total cost) = FC + VC
    TC = 150 + 200 * Q - 9 * Q^2 + 0.25 * Q^3

    Average fixed = fixed cost per ...

    Solution Summary

    This solution analyzes the characteristics of cost functions: fixed, variable, average and marginal