Question

A firm has a cost function given by c(y) = 10y2 + 1000. At what output
is average cost minimized?

Answer 1

The average cost is minimized when the marginal cost is equal to the average cost. The marginal cost is given by c'(y) = 20y. Setting c'(y) = c(y)/y, we get 20y = 10y2 + 1000/y. Solving for y, we get y = 10. Therefore, the output at which average cost is minimized is 10.