Homework SourseYou are given the following P 2415q VC 4q05q2 and FC 8Find
You are given the following: P= 24-1.5q, VC = 4q+0.5q^2 and FC = 8.Find the average cost minimizing output level. Maintain the principle that MC=AC
You are given the following: P= 24-1.5q, VC = 4q+0.5q^2 and FC = 8.Find the average cost minimizing output level. Maintain the principle that MC=AC
Solution
Average cost is minimum at the point where the marginal cost curve intersects it from bottom.
Total Cost TC = (8+ 4q+0.5q2) = VC + FC
AC = (TC / q) = (8/ q + 4 +0.5q)
MC = (4 + q ) on differentiating the TC.
Now, MC=AC => (8/ q + 4 +0.5q) = (4 + q )
Solving we get, q= 4 units
