Short, Run, Average, Variable, Costs
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Study of 60 firms
AVC = 1.24 + .0033Q + .0000030Q^2 - .000045QZ + .00020Z^2
Q Output
Z Plant Size
If Z = 150;
1. Determine the short run average variable cost and the marginal cost functions.
2. Determine the output level that minimizes short run average variable costs
3. Determine the SRAVC and marginal cost at the output level in 2
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Solution Summary
Determine the SRAVC and marginal cost at the output level in 2
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Part 1:
AVC = 1.24 + .0033Q + .0000030Q^2 - .000045QZ + .00020Z^2
For Z=150, substitute value of Z in the equation.
AVC = 1.24 + .0033Q + .0000030Q^2 - .000045Q*150 + .00020*150^2
AVC= 5.74 - .00345Q + .0000030Q^2
Total Variable Cost = AVC*Q=5.74Q - ...
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