Scenario: A perfectly competitive firm has the following cost functions:
Total cost: TC(q) = $10,000 = $100q = $10q²,
Marginal cost: MC(q) = $100 + $20q,
and it faces a market price of $900 per unit. The average and total cost curves are shown in the following figure.

-Refer to the scenario above.The firm's average total cost is given by ________.

Question

Scenario: A perfectly competitive firm has the following cost functions:
Total cost: TC(q) = $10,000 = $100q = $10q²,
Marginal cost: MC(q) = $100 + $20q,
and it faces a market price of $900 per unit. The average and total cost curves are shown in the following figure.
 
-Refer to the scenario above.The firm's average total cost is given by ________.

Quizplus · Accepted Answer

Average total cost (ATC) is calculated by dividing total costs by the quantity produced (q). The given scenario likely includes both fixed costs ($10,000) and variable costs that depend on the quantity produced ($100 + $10q). Thus, the ATC formula combines these costs and divides by q, resulting in $10,000/q + $100 + $10q.

Scenario: a Perfectly Competitive Firm Has the Following Cost Functions