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A Consulting Company Estimated Market Demand and Supply in a Perfectly

Question 58

Multiple Choice

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd=25,0005,000P+25MQ _ { \mathrm { d } } = 25,000 - 5,000 P + 25 M Qs=240,000+5,000P2,000PJQ _ { s } = 240,000 + 5,000 P - 2,000 P _ { J } where P is price,M is income,and PIP _ { I } is the price of a key input.The forecasts for the next year are M^\hat { M } = $15,000 and P^I\hat { P } _ { I } = $20.Average variable cost is estimated to be AVC=140.008Q+0.000002Q2A V C = 14 - 0.008 Q + 0.000002 Q ^ { 2 } Total fixed cost will be $6,000 next year.What is the firm's minimum average variable cost?


A) $ 2
B) $ 6
C) $ 8
D) $20

Correct Answer:

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