Suppose Kate's Great Crete (KGC)has annual variable costs of VC = 30Q + 0.0025Q² and marginal costs of MC = 30 + 0.005Q,where Q is the number of cubic yards of concrete it produces per year.In addition,it has an avoidable fixed cost of $50,000 per year.KGC's demand function is Q^d = 20,000 - 400P.What is KGC's average cost function?

Question

Quizplus · Accepted Answer

The formula for average cost (AC) is: AC = (total cost)/(quantity) To find total cost, we need to add the variable costs and the avoidable fixed costs: TC = VC + AFC where AFC = $50,000 Substituting the given variable cost and AFC in the above equation, we get: TC = 30Q + 0.0025Q² + 50,000 Dividing total cost by quantity, we get the average cost function: AC = (30Q + 0.0025Q² + 50,000)/Q Simplifying this equation, we get: AC = 50,000/Q + 30 + 0.0025Q Hence, the correct answer is C.

Suppose Kate's Great Crete (KGC)has Annual Variable Costs of VC