A firm has the long-run cost function C(Q)= 4Q2 + 196.In the long run, it will supply a positive amount of output, so long as the price is greater than
A)$120.
B)$112.
C)$56.
D)$28.
E)$61.

Question

Quizplus · Accepted Answer

In the long run, a firm will supply a positive amount of output if the price is greater than the minimum average cost. The average cost (AC) is given by AC(Q) = C(Q)/Q = 4Q + 196/Q. To find the minimum AC, take the derivative of AC with respect to Q, set it to zero, and solve for Q. The minimum AC occurs at Q = 7, and the minimum average cost is 56. Thus, the price must be greater than $56.

A Firm Has the Long-Run Cost Function C(Q)= 4Q2