Question 3

Question 3 [20] You are the economist at Grand Corporation. You estimated the company's cost function, using time series data, to be: TC = 50 + 16Q - 2Q2 + 0.2(Q)3 TC = Total cost Q = Quantity produced per period Required: 3.1 How much is the fixed cost? (1) 3.2. Calculate the values for total cost, marginal cost and average cost for the first five quantities (rounded off to the second decimal) and complete the following table: Quantity TC MC AC 1 2 3 4 5 (15) 3.3. Discuss your results in terms of decreasing, constant and increasing marginal costs and average cost. (4)