Assume that you hire a furloughed Wall Street analyst to help you analyze your production process and she employs your historical cost records to predict that your total cost function is C(Q) = 100 + 2Q + 3.5Q2.
By using this equation, answer the given and show your logic and computations.
Q1. How much is your firm’s profit or loss at an output of zero? Describe.
Q2. With the above cost equation, average total costs (ATC), first decline as output rises and then start to rise. Supposing output occurs in whole units, i.e. 1, 2, 3… at what output does the low point of ATC take place and what is the ATC at that output? Show your computations.
Q3. Find out the total cost of an output of 500?
Q4. Describe the Average Variable Cost (or AVC) at a production level of 10?