Question 7

7. Suppose the market for T-shirts in the country of Argonia is perfectly competitive, and the price of a T-shirt is $10. A producer in this market has the following total cost and marginal cost functions: TC(q) = 100 + 0.2q2 MC(q) = 0.4q a. What part of the total cost function represents fixed costs? Grading: correct answer - 1 point b. Write the equation for the firm's average variable cost. Grading: correct equation - 1 point c. Compute the number of T-shirts the firm will produce to maximize profit. Grading: correct answer - 0.5 point; answer is explained/work is shown - 0.5 point d. Compute the average total cost of producing the profit-maximizing quantity of T-shirts. Grading: correct answer - 0.5 point; answer is explained/work is shown - 0.5 point