Assume the short run variable cost function for Japanese beer is VC 0.55q08 If t

Question

Assume the short run variable cost function for Japanese beer is VC 0.55q08 If the fixed cost (F) is $600 and the firm produces 650 units, determine the total cost of production (C), the variable cost of production (VC), the marginal cost of production (MC), the average fixed cost of production (AFC), and the average variable cost of production (AVC). What happens to these costs if the firm increases its output to 750? Assuming the firm produces 650 units, the variable cost of production (VC) is VC= . (Enter your response rounded to two decimal places.)

Explanation / Answer

Fixed cost = $600 .

Q = 650

VC = 0.55Q0.8

VC = 0.55*6550.8 = 110.31

so, the answer is - ) VC = $110.31

TC = FC + VC = 600 + 110.31 = $710.31

MC = derivative of tc = 600 + 0.55q.8

MC = .44q.2 = .44*650.2 = 3.09

AFC = 600/650 = $0.923

AVC = 110.31/650 = $0.169

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