We are looking at a firm that offers its goods in a market with well-functioning competition. The firm's cost function C(x) is

C(x) = 0.5cx² + F

Where

x = production

F = fixed costs

c = a given positive number

a. Calculate the marginal cost for this cost function. Also, explain the term marginal cost

b. Does the cost function express constant, increasing, or decreasing returns to scale?

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a. My solution is MC = cx (derived the cost function). Is this correct? The description of the term is not a problem.

b. Based on the graph from the cost function I made in GeoGebra, it is convex. Does it mean that the cost function has increasing returns on scale? Or do I have to find the production function first and look at this graph? If so, how do I find this?