Question

Suppose that each firm in a competitive industry has the following costs: Total Cost: TC=50+1/2q^2 Marginal Cost: MC=q where q is an individual firm's quantity produced. The market demand curve for this product is: Demand QD=160−4P where P is the price and Q is the total quantity of the good. Each firm's fixed cost is $ . What is each firm's variable cost?

Answer 1

Answer:

Fixed cost = constant term i.e 50

Variable cost = $\frac{q^2}{2}$

Explanation:

Data provided in the question:

Total Cost: TC = $50+\frac{q^2}{2}$

here q is an individual firm's quantity produced

Demand QD = 160 − 4P

here P is the price and Q is the total quantity of the good

Now,

The Total cost = Fixed cost + Variable cost

here, Fixed is constant, while the variable cost varies with number of quantities being produced

Thus,

from the total cost function, we have

Fixed cost = constant term i.e 50

Variable cost = $\frac{q^2}{2}$