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If TC=4,800+30Q+3Q, what level of Q generates the minimum average cost?
If TC=4,800+30Q+3Q, what level of Q generates the minimum average cost?
Expert Solution
Let us calculate the average cost curve from the total cost function.
To get the average cost function, we will divide the total cost curve by Q.
The average total cost is minimized when the first order derivative of the average cost curve with respect to Q is equal to zero.
Differentiating the average total cost curve with respect to Q and equating to zero:
Solving for Q:
units.
This is the level of output that minimizes the average total cost.
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