SHORT RUN COSTS NAME (11) Due Show work for credit! Use the function below (whose parameters qualify it as a STC function) to answer the questions. See the text p. 244 for a representative figure. STC 400 10:2..302 .403 = + _ + a. Total fixed cost is $ b. Obtain the AFC function from (a) and write it here c. Obtain the AVG function contained in the STC function and write the AVG function here d. Write here the MC function e. Find the value which AFC approaches as Q gets very large. Also write a sentence or two explaining what this implies for fixed costs per unit (AFC) as production quantities get ever larger. f. Find the value of Q at which AVC is a minimum. 9. Is productive efciency at this value greatest or least? h. Demonstrate that the value of SMC equals the value of AVG at the value of Q where AVC is a minimum. Hint: The level of Q you found in (f) is where AVC is a minimum. If you plug this level of Q into AVC (see c) and also into MC (see d) the two outcomes should be the same if SMC crosses AVC at this level of Q. i. Why does the derivative of Short Run Total Cost (STC) equal the derivative of Total Variable Cost (TVC)? Stated another way, why does dSTCfdQ = dTVCIdQ? Explain in a couple of sentences (Hint: See Wpage 235 and footnote 16). j. Find the value of Q where increasing returns ceases and diminishing returns begins. Hint: Diminishing returns begins at the level of Q where MC is a minimum. SRCosts11.docx 060120