Figure 13-3
-Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function?

Question

Figure 13-3 
-Refer to Figure 13-3. Which of the following is true of the production function (not pictured) that underlies this total cost function?

Quizplus · Accepted Answer

The total cost function is TC = 20 + 2Q + Q^2. The marginal cost function is MC = dTC/dQ = 2 + 2Q. The average variable cost function is AVC = TVC/Q = 2 + Q. The average total cost function is ATC = TC/Q = 20/Q + 2 + Q.(i) The marginal cost function is increasing. This implies that the production function is subject to increasing marginal costs.(ii) The average variable cost function is U-shaped. This implies that the production function is subject to decreasing returns to scale at low levels of output and increasing returns to scale at high levels of output.(iii) The average total cost function is U-shaped. This implies that the production function is subject to decreasing returns to scale at low levels of output and increasing returns to scale at high levels of output.

Figure 13-3 -Refer to Figure 13-3. Which of the Following Is True