Problem: Suppose firms cost function is C(q) = 4q ^2 + 16
a) Find variable cost, fixed cost, average cost, average variable cost,and average fixed cost. (Hint: Marginal cost is given by MC = 8q)
b) Show the average cost, marginal cost, and average variable cost curves on a graph.
c) Find the output that minimizes average cost.
d) At what range of prices will the firm produce a positive output? (Hint: MC > AV C)
e) At what range of prices will the firm earn a negative profit? (Hint: include fixed cost.)
f) At what range of prices will the firm earn a positive profit?