) The Deering Manufacturing Company’s short- run average cost function in 2014 was AC = 3 + 4Q, where AC is the firm’s average cost (in dollars per pound of the product), and Q is its output level.
a. Obtain an equation for the firm’s short- run total cost function.
b. Does the firm have any fixed costs? Explain.
c. If the price of the Deering Manufacturing Company’s product (per pound) is $3, is the firm making profit or loss? Explain.
d. Derive an equation for the firm’s marginal cost function.

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mariamtomori mariamtomori · Answer 1 · 2019-11-12T14:03:20+01:00

Answer:

a. the firm short run total cost is = AC * Q = (3+ 4Q)*Q = 3Q + 4Q²

b. Yes, the firm has a fixed cost

c. Yes.. the firm is making loss

d. MC =Δ(3Q + 4Q²) / ΔQ =

Explanation:

short run is a period of time during which one or more firm input cannot be change.

average cost is the average cost per unit output = TC/Q

from the question, AC = 3+ 4Q

a. the firm short run total cost is = AC * Q = (3+ 4Q)*Q = 3Q + 4Q²

b. Yes, the firm has a fixed cost

Fixed cost is the cost of input that remain constant through out the short run. most operating firm has a fixed cost.

Average cost can be calculated by Average fixed cost + average variable cost. the fixed cost can be assumed to be 3.

c. Yes.. the firm is making loss

Average cost (dollar/pound)= Total cost/Q

Assume Q is 10.

AC = 3+40 = 43

TC = 3Q + 4Q²= AC*Q = 43*10 = 430

AFC= 3

AVC=40

sale revenue = Q * price = 10 * $3 =$30

AC - Sale revenue = profit or loss

$43 -$30 = -$13 loss.

d. marginal cost (MC) is the additional cost that results in an increasing output by 1unit.

MC = change in Total Cost divide by change in 1unit quantity increment

MC =Δ(3Q + 4Q²) / ΔQ =