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Managerial Economics: Cost Function

1. An economist estimated that the cost function of a single product is
C(Q)= 50 +25Q+30Q SQUARED+5Q CUBED
Based on this information determine:
a. The fixed cost of producing 10 units of output.
b. The variable cost of producing 10 units of output.
c. The total cost of producing 10 units of output.
d. The average fixed cost of producing 10 units of output.
e. The average variable cost of producing 10 units of output.
f. The average total cost of producing 10 units of output.
g. The marginal cost when Q = 10.

Solution Preview

Please refer to the attached file for the computation guide provided.

Cost Function Computation Guide
1. An economist estimated that the cost function of a single product is
C (Q) = 50 +25Q+30Q SQUARED+5Q CUBED
Based on this information determine:
a. The fixed cost of producing 10 units of output.
Fixed cost is the cost that does not change with the change in output. Hence, even though the production (Q) is zero, the amount is still the same. Referring to the cost function at hand, the fixed cost is 50. Even with the assumption that Q is zero, it is still the same.

b. The variable cost of producing 10 ...

Solution Summary

Managerial economics cost functions for a single product is examined. The fixed cost of producing 10 units of output are determined.

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