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# The marginal cost function

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A competitive firm estimates its average variable cost function to be . AVC=125-.21Q+.0007Q^2(squared)
The firm's total fixed cost is \$3,500.
a. The marginal cost function associated with this average variable cost function is
SMC =__________________________.
b. AVC reaches its minimum at ______ units of output. Minimum AVC is _________.
c. Suppose the price of the product is P = \$125. The firm should produce _________ units of output. The
firm earns a profit (loss) of __________________.
d. Suppose the price of the product is P = \$115. The firm should now produce _________ units of output.
Its profit (loss) will be _________.
e. Suppose the price of the product falls to P = \$100. The firm should produce _________ units of output.
Its profit (loss) will be ____________.

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#### Solution Preview

A competitive firm estimates its average variable cost function to be .
AVC=125-.21Q+.0007Q^2(squared)

The firm's total fixed cost is \$3,500.
a. The marginal cost function associated with this average variable cost function is
SMC =__________________________.

a. The firm's total cost, TC = TFC +TVC

Or, TC = TFC + AVC.Q

Or, TC =3500 + (125 -0.21Q+ 0.0007Q2).Q

MC = d(TC)/dQ = 125 - 0.42Q + 0.0021Q2

b. AVC reaches its minimum at __150____ units of output. Minimum AVC is ___109.25______.

d(AVC)/dQ = o when AVC ...

#### Solution Summary

The marginal cost function is examined.

\$2.49