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CA Video is in the perfectly competitive DVD repair business
CA Video is in the perfectly competitive DVD repair business. CA found that the total cost of repairing q DVD is TC=2q2+100TC=2q2+100.
1. Write an equation for CA's average total cost.
2. Write an equation for CA's variable cost.
3. Write an equation for CA's marginal cost (use calculus).
Expert Solution
Given total cost function:
TC=2q2+100TC=2q2+100
1) Average total cost is the total cost per unit of labor.
- ATC = TC/Q
ATC=(2q2+100)/qATC=(2q2+100)/q
- ATC=2q+100/qATC=2q+100/q
2) Variablecost=2q2Variablecost=2q2
Variable cost increases with increase in the output.
3) Marginal cost is the additional cost incurred by producing one more unit of output. It is calculated by differentiating total cost function with respect to output.
- MC=dTC/dQMC=dTC/dQ
- MC=4q
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