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the Short run Cobb Douglas cost curve is given by C(a) Bq/aF, where a>0 and B>0 and F are constants

A. identify the meaning of F in economic terms

B. Let B=5, F 80000, a= 1/3 , so that C 5q80000. write down the average cost C(q) AC (q) . Note that the Note that the average cost is the slope of the line from (0, 0) to (q, C(q)) on the graph of C(q) versus q.

C.  Find the minimum of AC.

D. At this minimum level, compare the marginal cost to the average cost. Based on this, sketch the graph of C(q) versus q (it’s just a cubic curve shifted up), and identify the point where the marginal cost (which is the slope of what?) is equal to the average cost (which is the slope of what, as noted above?)—i.e. the point you’re looking for is where the tangent line goes through what other point?

C(a) Bq/aF,
B=5, F 80000, a= 1/3
C 5q80000
C(q) AC (q)
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Answer #1

fixed Got sACla) at minimun N1 20. 8ND 5 X4D minimum AC 2D + D ds159 marginal 61t 2 3 プ9=800 プ9:20. 20 A (20 12020D) maygnol

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