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How do you get the average variable cost and marginal cost of:

C(q)= 500 + 560q - 40q^2 + q^3

***(^2 is squared, ^3 is cubed)****

I'm trying to compare the price to the average variable cost to see if they should remain in business, but I can't figure out how to do work with multiple q's.

I get stuck at: 500/q + 560 - 40q + q^2 and don't know how to remove terms.

The condition is 170> Average variable cost of C(q)= 500 + 560q - 40q^2 + q^3. If it isn't then they should leave the market.

2007-08-08 09:08:32 · 3 answers · asked by Antonio B 2 in Social Science Economics

I understand how to do the MC and AVC, but I get stuck once I have it in the form Toot showed.

I need to evaluate whether compared to the market price of $170, if the company should stay in business or not in the short-term. My understanding is that if Price is Greater Than Average Variable Cost then they should stay in business. How do I do this though if I don't know Q?

2007-08-08 09:29:46 · update #1

3 answers

first c(q) is cost function which has 2 components fixed and variable
I see an error in that what you want to compare is AVC to price but when you divide C(q) by or C(q)/q [which is what you did] you get ATC average TOTAL cost

your variable cost is the part that changes when q changes or VC = 560q - 40^2 + q^3
so AVC = 560 - 40q + q^2

now the problem is fuzzy for me. I don't understand what your condition is but it should help you that AVC is quadratic so the quadratic formula will work if you can't factor

OH I didn't see the other part
you have p=$170
so set AVC = 170 and solve for q you will get 2 of them
you'll want to large one
that q is the shut down point so as long as the firm can sell that q at a price $170 it will stay in business

2007-08-08 10:45:28 · answer #1 · answered by haggismoffat 5 · 1 1

for the marginal cost you need to take the derivative of the cost function which is:

560 - 80q + 3q^2

for the average variable cost you just need to divide the whole equation by q which is:

500/q + 560 -40q + q^2

2007-08-08 09:18:21 · answer #2 · answered by Toot 3 · 0 0

see if you are the producer, your expenditure is 2000(eg).you are producing 10 dress a day .cost of 10 dress =2000. but suddenly you got extra order for 5 dress. therefore your variable cost = 500

2007-08-09 05:18:00 · answer #3 · answered by chincha 3 · 0 1

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