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Calculate the average fixed cost

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Question - The cost function of a company is given by the equation TC = 25+ 60Q+0.05Q2, where TC is the total cost and Q is the total quantity of output. Both TC and Q are measured in thousands. 

(i) Calculate the average fixed cost, marginal cost, average variable cost and average total cost of the company when quantity of output is at 50,000 units (that is, Q=50) and examine whether the provided function is a short-run or a long-run production function.

(ii) Suppose the company gets a loan of $40,000 from a bank to upgrade its machines for enhanced productivity. The fixed interest rate of the loan is 2%.

After upgrading its machines, its variable cost reduces by 20% per 1000 units. Formulate the new production cost function at the same output level.

Reference no: EM132839863

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