Question

There are 56 firms in a perfectly competitive market. They produce keyboards at a price of $48 a unit. each firm's cost is 0.5q^3 - 5q^2 +65q.

What are the fixed costs and variable costs?

How much does each firm produce and profit?

So far I believe the fix cost is zero.

average cost = average variable cost. = .5q^2 -5q + 65

marginal cost = q^2 - 10 + 65

The firm does not produce at the price point becuase the price of 48 is below the average variable cost curve.

Answer 1

Answer : The given total cost (TC) is

TC = 0.5q^3 - 5q^2 + 65q

We know that

Total cost = Total variable cost + Total fixed cost.

In the given total cost function, there is no fixed cost. This means here Fixed Cost = 0.

Here variable cost means total variable cost.

Total variable cost(TVC) = 0.5q^3 - 5q^2 + 65q

Here quantity is not given. Let q = 1

The formula of average variable cost(AVC) is

AVC = TVC / q = 0.5q^2 - 5q + 65

Now putting the value of q = 1 in AVC, we have,

AVC = 0.5 (1)^2 - 5 (1) + 65 = $60.5

But given that the per unit price level is $48

As the average variable cost is higher than the market price level, firms will stop their production.

As production is zero at price $48 , the profit is zero.