An accountant for a car rental company was recently asked to report the firm's costs of producing various levels of

Question

An accountant for a car rental company was recently asked to report the firm's costs of producing various levels of output. The accountant knows that the most recent estimate available of the firm's cost function is C (Q) = 100 + 10Q +Q^2 where costs are measured in thousands of dollars and output is measured in thousands of hours rented. a. What is the average fixed cost of producing 4 units of output? b. What is the average variable cost of producing 4 units of output? c. What is the average total cost of producing 4 units of output? d. What is the marginal cost of producing 4 units of output? e. What is the relation between the answers to (a), (b), and (c) above? Is this a general property of average cost curves?

Help In Homework · Accepted Answer

a) Total fixed cost =100 Average fixed cost = 100/Q At 4 units Average fixed cost =100/4 Average fixed cost = 25 b) Total variable cost =10Q+Q2 Average variable cost =10+Q At 4 units Average variable cost = 10+4 Average variable cost =14 c) Total cost = 100+10Q+Q2 Average total cost = 100/Q+10+Q At 4 units Average total cost = 100/4+10+4 Average total cost = 25+14 Average total cost = 39 d) Marginal cost = 10+2Q At 4 units Marginal cost =10+2(4) Marginal cost =10+8 Marginal cost = 18 e) Yes, it is true that it is general property of average cost curve. It means as total cost is the summation of total fixed cost and total variable cost so average cost is the summation of average fixed cost and average variable cost. It means a+b=c.

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An accountant for a car rental company was recently asked to report the firm's costs of producing various levels of output

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