Explore BrainMass
Share

Explore BrainMass

    minimizing the average cost

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A domestic auto producer is facing intense competition in the US market from Asian imports. The CFO decides that the solution is to produce at the point at which average cost is minimized, i.e. where TC/Q is at a minimum. The firm's cost structure is given by:

    TC={(1/3Q)^3}-{(100Q)^2}+20,000Q

    Calculate the average cost-minimizing level of output and demonstrate that this level of output is at minimum average cost. Call this output level Qmin. You are hired by the firm as an economic consultant, and you estimate the total revenue function to be

    TR=20,000Q

    Is Qmin the correct output level? What would you, as an economist, calculate as the level of output most beneficial to the firm? Are your estimated profits higher than those of the CFO?

    © BrainMass Inc. brainmass.com October 9, 2019, 8:35 pm ad1c9bdddf
    https://brainmass.com/math/derivatives/minimizing-average-cost-155731

    Solution Preview

    Please see the attached file for the complete solution.
    Thanks for using BrainMass.

    A domestic auto producer is facing intense competition in the US market from Asian imports. The CFO decides that the solution is to produce at the point at which average cost is minimized, i.e. where TC/Q is at a minimum. The firm's cost structure is given by:

    TC={(1/3Q)^3}-{(100Q)^2}+20,000Q

    Calculate the average cost-minimizing level of output and ...

    Solution Summary

    The output level at which the average cost minimized is calculated. The solution was rated as "5/5" by the student who originally posted the question.

    $2.19