Suppose a firm has a weekly cost function of C(Q)= 8Q + (Q²/100)and a marginal cost function of MC = 8 + (Q/50).Suppose the firm also has an avoidable fixed cost of $225.What is the efficient scale of production,and what is the minimum average cost? A) Q^e = 0; AC = $8 B) Q^e = 106; AC = $10.95 C) Q^e = 150; AC = $10.83 D) Q^e = 22,500; AC = $9.25

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Quizplus · Accepted Answer

The efficient scale of production is where marginal cost equals average cost. Setting MC = AC, we get 8 + (Q/50) = 8 + (Q/Q) = 8 + 1 = 9. Solving for Q, we get Q^e = 106. Plugging this back into the AC equation, we get AC = (8Q + (Q²/100)) / Q = (8(106) + (106²/100)) / 106 = $10.95.

Suppose a Firm Has a Weekly Cost Function of C(Q)=