Math Problem Statement
Solution
The problem you're presenting shows a cost function and asks for the calculation of different types of costs related to production. The given total cost (TC) function is:
Here, represents the quantity of goods produced.
Let’s break down the different components and determine the answers for each part:
a) Fixed Cost (FC):
The fixed cost is the portion of the total cost that does not depend on the quantity produced. In the equation , the fixed cost is the constant term, which is 45.
b) Variable Cost (VC):
The variable cost is the part of the total cost that changes with the level of output. The term involving , which is , represents the variable cost.
c) Average Variable Cost (AVC):
The average variable cost is the variable cost per unit of output, calculated by dividing the variable cost by the quantity .
d) Average Cost (AC):
The average cost is the total cost per unit of output, calculated by dividing the total cost by the quantity .
This provides the breakdown of costs as requested.
Would you like further details or clarification on any of the steps? Here are five related questions to expand on this:
- What is the relationship between marginal cost and variable cost?
- How does fixed cost behave as output increases?
- What happens to average cost as production increases indefinitely?
- Can the average variable cost ever exceed the average cost? Why or why not?
- How can you determine marginal cost from the total cost function?
Tip: Always separate fixed and variable costs to clearly see how they influence overall expenses at different output levels.
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Math Problem Analysis
Mathematical Concepts
Cost Functions
Algebra
Formulas
TC = 20Q + 45
FC = 45
VC = 20Q
AVC = VC / Q = 20
AC = TC / Q = 20 + 45 / Q
Theorems
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Suitable Grade Level
College-level Economics or Intermediate Algebra
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