Answer to Question #25424 in Microeconomics for michelle corbett
Question #25424
A manufacturing firm produces output using a single plant. The relevant cost function is C=500+5Q^. the demand curve is P=600-5Q. Find the level of output at which average cost is minimized.
Expert's answer
The level of output at which average cost is minimized can be found in the point, where MR = MC = Pd.
MC = C' = (500+5Q^2)' = 10Q.
Pd = 600 - 5Q
MC = Pd
10Q = 600 - 5Q
15Q = 600
Q = 40 units of output.
So, when Q = 40, the average cost is minimized and profit is maximized.
MC = C' = (500+5Q^2)' = 10Q.
Pd = 600 - 5Q
MC = Pd
10Q = 600 - 5Q
15Q = 600
Q = 40 units of output.
So, when Q = 40, the average cost is minimized and profit is maximized.
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