Question
Assume a representative company with the following cost function: T C ( q ) = 4 q 3 1 6 q 2 + 2 6
Assume a representative company with the following cost function: TC(q)=4q316q2+26q+300 and having a marginal cost of: MC=12q232q+26 It is requested: 1. indicate what is the variable cost and the fixed cost. does this curve correspond to a short or long run cost function? 2. Find the average variable cost (AVC) and average total cost (ATC) curves. What is the difference between them? Which is the most relevant in the firm's short-run closing decision? 3. Derive the short-run supply function. 4. Assume that the cost function in the LONG-TERM isTC(q)=4q316q2+26q and the market demand is Q=100p. What will be the number of firms that will prevail in the LONG-TERM? Help: The marginal cost of LONG TERM is LMC(q)=12q232q+26.
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