A firms average cost is AC = q, where 7 0. How can you interpret ?

A firm’s average cost is AC = αqβ, where α 7 0.

How can you interpret α? (Hint: Suppose that q = 1.) What sign must β have if this cost function reflects learning by doing? What happens to average cost as q increases? Draw the average cost curve as a function of output for particular values of α

and β. M 5. Cost of Producing Multiple Goods