Purchase Solution

minimizing the average cost

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution

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.

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 ...

Purchase this Solution


Free BrainMass Quizzes
Know Your Linear Equations

Each question is a choice-summary multiple choice question that will present you with a linear equation and then make 4 statements about that equation. You must determine which of the 4 statements are true (if any) in regards to the equation.

Graphs and Functions

This quiz helps you easily identify a function and test your understanding of ranges, domains , function inverses and transformations.

Geometry - Real Life Application Problems

Understanding of how geometry applies to in real-world contexts

Probability Quiz

Some questions on probability

Exponential Expressions

In this quiz, you will have a chance to practice basic terminology of exponential expressions and how to evaluate them.