Average Cost Minimization. Better Buys, Inc., is a leading discount retailer of wide-screen digital and cable-ready plasma HDTVs. Revenue and cost relations for a popular 55-inch model are:
TR = $4,500Q ï? $0.1Q2
MR = ï?TR/ï?Q = $4,500 ï? $0.2Q
TC = $2,000,000 + $1,500Q + $0.5Q2
MC = ï?TC/ï?Q = $1,500 + $1Q
A. Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level.
B. Calculate these values at the profit-maximizing activity level.
C. Compare and discuss your answers to parts A and B.
The solution provides the necessary cost calculations.