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Finding minimum variable costs of given cost function

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The average variable cost equation for a competitive firm is:
AVC = 10 - 2Q + 0.5Q^2

1. At what output is AVC at a minimum?

2. If the market price of the firm's output is $7 per unit, should the firm produce or shut down?

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Solution Summary

The solution describes the steps for determining output level for which average variable cost is minimum. It also discusses whether firm should continue to produce or shut down.

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Solution

The average variable cost equation for a competitive firm is:
AVC = 10 - 2Q + 0.5Q^2

1. At what output is AVC at a minimum?

AVC=10-2Q+0.5Q^2
For AVC to be minimum ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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