Answer the following questions:

Question 1

·Bottom of Form

Cost functions, a part of the definition of profit, are useful to gauge the performance of the business. Suppose an economist estimated that the cost function of a single-product firm as:

C(Q) = 40 + 4Q + 4Q²+ 4Q³

Based on this information, determine the followings and show all steps

Hint: THE use of Graphs is recommended.

a. Define fixed cost and offer an example. Next, compute thefixed costof producing 10 units of output using the cost function above.

b. Define variable cost and offer an example. Next compute thevariable costof producing 10 units of output using the cost function above.

c. Define total cost and then compute thetotal costof producing 10 units of output using the cost function above

d. Define and compute theaverage fixed costof producing 10 units of output

e. Define and compute theaverage variable costof producing 10 units of output

f. Define and compute theaverage total costof producing 10 units of output

g. Define marginal cost an offer an example. Next, compute themarginal costwhen Q = 10, using the cost function above

Question 2

A firm’s fixed costs for producing 0 units of output and its average total cost of producing different output levels are summarized in the tale below.

Complete the tableto find thefixed cost,variable cost,total cost,average fixed cost, average variable cost, and marginal costat all levels of output.

Q FC VC TC AFC AVC ATC MC

0 $200 ——-

10 $25

20 15

30 12

40 17

50 29

60 37

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