e) The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output, both measured in thousands. i. What is the company's fixed cost? ii. If the company produced 100,000 units of goods, what would be its average variable cost? iii. What would be its marginal cost of production? iv. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost of interest (r) also enters into the equation. Each 1-point increase in the interest rate raises costs by $3000. Write the new cost equation.

e) The short-run cost function of a company is given by the equation TC = 200 + 55q, where TC is the total cost and q is the total quantity of output, both measured in thousands. i. What is the company's fixed cost? ii. If the company produced 100,000 units of goods, what would be its average variable cost? iii. What would be its marginal cost of production? iv. Suppose the company borrows money and expands its factory. Its fixed cost rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost of interest (r) also enters into the equation. Each 1-point increase in the interest rate raises costs by $3000. Write the new cost equation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

e) The short-run cost function of a company is given by the equation TC = 200 +
55q, where TC is the total cost and q is the total quantity of output, both
measured in thousands.
i. What is the company's fixed cost?
ii. If the company produced 100,000 units of goods, what would be its average
variable cost?
iii. What would be its marginal cost of production?
iv. Suppose the company borrows money and expands its factory. Its fixed cost
rises by $50,000, but its variable cost falls to $45,000 per 1000 units. The cost
of interest (r) also enters into the equation. Each 1-point increase in the
interest rate raises costs by $3000. Write the new cost equation.

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