Exercise 4 Hack's Berries faces a short-run total cost of production given by STC (q) = q³12q² + 100q + 1,000, where q is the number of crates of berries produced per day. All fixed costs are sunk (unrecoverable). a) Find the short-run marginal cost curve, SMC (q). b) Find the average variable cost curve, AVC(q). c) Find the level of output corresponding to the minimum level of the firm's average variable cost curve. [Hint: At the minimum level of the average variable cost curve, it crosses with the short-run marginal cost curve. Set AVC(q) = SMC(q) and solve for q] d) If berries sell for p = $60 per crate, how many berries should Hack produce? How do you know? [Hint: Find the average variable cost of producing the output you found in part (c) and think how this value helps to decide how many berries to produce]

Exercise 4 Hack's Berries faces a short-run total cost of production given by STC (q) = q³12q² + 100q + 1,000, where q is the number of crates of berries produced per day. All fixed costs are sunk (unrecoverable). a) Find the short-run marginal cost curve, SMC (q). b) Find the average variable cost curve, AVC(q). c) Find the level of output corresponding to the minimum level of the firm's average variable cost curve. [Hint: At the minimum level of the average variable cost curve, it crosses with the short-run marginal cost curve. Set AVC(q) = SMC(q) and solve for q] d) If berries sell for p = $60 per crate, how many berries should Hack produce? How do you know? [Hint: Find the average variable cost of producing the output you found in part (c) and think how this value helps to decide how many berries to produce]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

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.

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Show full answers & steps to part b) c) & d)

Exercise 4
Hack's Berries faces a short-run total cost of production given by
STC(q) = q³ 12q² + 100q + 1,000, where q is the number of crates of berries produced per
day. All fixed costs are sunk (unrecoverable).
a) Find the short-run marginal cost curve, SMC(q).
b) Find the average variable cost curve, AVC(q).
c) Find the level of output corresponding to the minimum level of the firm's average variable
cost curve. [Hint: At the minimum level of the average variable cost curve, it crosses with
the short-run marginal cost curve. Set AVC(q) = SMC(q) and solve for q]
d) If berries sell for p = $60 per crate, how many berries should Hack produce? How do you
know? [Hint: Find the average variable cost of producing the output you found in part (c)
and think how this value helps to decide how many berries to produce]

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