This question deals with cost curves and isoprofit curvesKeep in mind that the formula for a firm's cost function is:TC = FC + C(Q)TC → Total Costs:FC → Fixed Costs:C(Q) → Cost of production*Quantity produced → also known as Variable CostsQ1: Firms A and B are two firms supplying products in two separate differentiated goods markets.Equations (1) and (2) give the total cost functions of the two firms:- Firm A: TC = 2Q --- Equation (1)- Firm B: TC = 10 + 2Q --- Equation (2)Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.The cost per unit in each firm is $2. Firm B has a fixed cost of $10.(a) Make relevant plots of equations (1) and (2)(b) Use the plots in (a) and plots of isoprofit curves valuing $34,000 and $60,000 for the two firms toidentify any differences in the shape of the two firms' isoprofit curves. Can you provide anexplanation for any differences that may exist?(c) Use the information on both firms to assess whether the higher isoprofit curves would always getcloser to the average cost curve as quantity increases. Explain why or why not.

(a) The cost function of firm A is, TC = 2Q ……...equation (1) The cost function of firm B is, TC…

ake relevant plots of equations (1) and (2) se the plots in (a) and plots of isoprofit curves valuing $34,000 and $60,000 for the two firms to entify any differences in the shape of the two firms’ isoprofit curves. Can you provide an planation for any differences that may exist? se the information on both firms to assess whether the higher isoprofit curves would always get oser to the average cost curve as quantity increases. Explain why or why not.

ake relevant plots of equations (1) and (2) se the plots in (a) and plots of isoprofit curves valuing $34,000 and $60,000 for the two firms to entify any differences in the shape of the two firms’ isoprofit curves. Can you provide an planation for any differences that may exist? se the information on both firms to assess whether the higher isoprofit curves would always get oser to the average cost curve as quantity increases. Explain why or why not.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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