Question 6 (c)(i)

Average variable cost from TC = 400 + 0.2Q²

1 mark

Time to write
About 2 minutes
Topic
Outside the topics the syllabus names

Question

Question 6 (c)(i) · 1 marks

In a perfectly competitive market the price of a good is ₹60. A producer has the total cost and marginal cost functions given below.

TC(Q) = 400 + 0.2 Q^2^ MC(Q) = 0.3 Q

  1. Write down the equation for the firms average variable cost.

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

2 minfor 1 marks

What the paper leaves open

As printed, the marginal cost function given is not the slope of the total cost function given; this copy keeps both as printed and the part is answered with the functions as given.

Write it in this order

  1. 1 AVC equation from the variable part of total cost 1 mark 2 min

Try it first. About 2 minutes for 1 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Fixed and variable parts of cost. Total cost is total fixed cost plus total variable cost, TC = TFC + TVC. In TC(Q) = 400 + 0.2Q², the term 400 does not change with output, so it is the fixed cost; the term that grows with output is the variable cost: TFC = 400 and TVC = 0.2Q².

Average variable cost. Average variable cost is total variable cost per unit of output, AVC = TVC ÷ Q:

AVC = 0.2Q² ÷ Q = 0.2Q.

Answer. The firm's average variable cost is AVC(Q) = 0.2Q (for example ₹40 at an output of 200).

Where the 1 marks sit

#ComponentMarks
1AVC equation from the variable part of total cost1
Total1
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