Question

In: Economics

If a firm's marginal cost is 7q, where q is its output, and theprice of...

If a firm's marginal cost is 7q, where q is its output, and the price of output is $40. Assuming that this firm is producing output, the the firm's total variable cost will be equal or less than?

Solutions

Expert Solution

Answer to the ollwing question:

A firm in equilibrium will produce at a point where the MR=MC. The AR=Price=40. So, TR=ARxQ=40xQ=40Q. Thus, MR is:

Now, we have MC=7Q, equilising both we get:

Now, we can find the TC function fom the MC function:

Since TC=TVC+TFC, here, C is the Total Fixed Cost and 3.5Q^2 is the Total Variable Cost, thus, the TVC at Q=5.71 is:


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