Question

Assume a firm operating under a short run production period with a total cost function given as TC=200+5Q+2Q^2.
What must be the output size to minimize the average cost of production, and show if marginal cost of production is increasing or decreasing at this point

Answer 1

The output size to minimize the average cost of production is Q = 10. At this output size, the marginal cost of production is decreasing, since the derivative of the total cost function is MC = 5 + 4Q, which is decreasing as Q increases.

Answer 2

The output size to minimize the average cost of production is Q = 10. At this output size, the marginal cost of production is decreasing, since the derivative of the total cost function is MC = 5 + 4Q, which is decreasing as Q increases.