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Example of working with Total Cost Function

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1. Determine a total cost function of transport services (e.g. road freight) as a function of volume
of production. How you can derive now the average cost and the marginal cost of production?
Why it is important to know and to be able to formulate average and marginal cost functions when we are interested in evaluating the natural monopoly?

TC = 300Q + 10000

Derives AC and MC

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Solution Summary

Transport Economy and total cost function of transport services are solved.

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1. Determine a cost function of transport services.

Let Q = volume of production
TC = Total Cost

TC = 300Q + 10000

You can derive the Average cost (AC) by dividing the TC by Quantity.

AC = ...

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