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 = 4850 + 40Q - 1.5Q^2 + .04Q^3 FC = $4,850 AFC = 4,850 / Q (I calculated this)

AVC = 40 - 1.5Q + .04Q^2 (I calculated this) MC = 40 - 3Q + 0.12Q^2 (I calculated this)

e. Find the value which AFC approaches as [1 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. As Q gets larger, (4,350 i Q) trends to zero. A]? C is close to zero when output is high. If Q rises, AF C becomes too small for consideration and would become an irrelevant cost component. Correct? '3? Find the value of Q at which AVC is a minimum. (1 = 37.5 AVC==40-15QF34Q2 davc__ "ow0 -1.5 + .04Q = 0 Correct??? .U4Q = 1.5 1.5 km Q=315 Minimum when f. ls productive efficiency at the value in {f} greatest or least? g. Demonstrate that the value of SMC equals the value of AVE at the value of Q where AVC is a minimum. Hint: The level onvou found in [f] is where AVC is a minimum. If you plug this level of [1 into AVC {see c] adalg into MC {see d} the two outcomes should be the same if SMC crosses AVC at this level of [1. h. Why does the derivative of Short Run Total Cost [STC] equal the derivative of Total Variable lCost {WC}? Stated another way, why does dSTC g = mag? Explain in a couple of sentences (Hint: See Tru ett page 235 and footnote 16}. i. Find the value of Qwhere increasing returns ceases and diminishing returns begins. Hint: Diminishing returns begins at the level of Qwhere MC is a minimum