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Analyze the short run and long cost functions for the low-calorie microwaveable food company given the cost functions below and suggest substantive ways in which the low-calorie food company may use this information in order to make decisions in both the short-run and the long-run.
TC = 160,000,000 + 100Q + 0.0063212Q2
VC = 100Q + 0.0063212Q2
MC= 100 + 0.0126424Q
More specifically:
a. Determine the Average Total Cost function (ATC) where ATC = TC/Q.
b. Determine the quantity (Q) associated with minimum ATC. (Hint: ATC is minimized when ATC = MC).
c. Determine the minimum value of ATC.
Remember that to be profitable, the product's price (P) must be greater than its average total cost (ATC) at the optimal level of output (Q).
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