A Firm Can Produce Any Quantity of Good X with the Following

question 161

Essay

A firm can produce any quantity of good X with the following cost structure: TC = 450,000 + 20Q, where Q measures units of output.
a. What happens to the firm's average total cost of production as it expands output?
b. What type of firm is this?
c. The industry demand for good X is Q = 100,000 - 500P. At the profit-maximizing output level, calculate the firm's ATC of production.
d. Suppose the profit-maximizing output level you calculated to answer part c is split evenly between two firms, each with the cost structure given by TC = 450,000 + 20Q. What is the ATC of production in this two-firm industry?

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