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April 19, 2014

Homework Help: Math

Posted by 413 on Monday, January 15, 2007 at 4:03pm.

The demand for item A is
P=40 -3.5Q
The production of A entails the following average variable costs:
AVC=1.5Q - 35
Fixed Costs are 24.

a) Calculate the revenue maximizing price of A
Revenue= PQ
Revenue= 40Q-3.5Q^2
Revenue' = 40-7Q
Q=40/7
P=40-3.5(40/7)
P=20
seems right?

b) Calculate the output level that minimizes the Average total cost.
-What is the average total cost equation?
do you just add the fixed cost to the AVC
ATC=1.5Q-35+24
ATC=1.5Q-11

or

is it finding variable cost first by dividing AVC by Q, then adding the fixed cost, then divide by Q
VC=1.5Q^2-3.5Q
TC=1.5Q^2-3.5Q+24
ATC=1.5Q-3.5+24/Q

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