Suppose Kate's Great Crete (KGC)has Annual Variable Costs of VC

question 55

Multiple Choice

Suppose Kate's Great Crete (KGC) has annual variable costs of VC = 30Q + 0.0025Q² and marginal costs of MC = 30 + 0.005Q,where Q is the number of cubic yards of concrete it produces per year.In addition,it has an avoidable fixed cost of $50,000 per year.KGC's demand function is Q^d = 20,000 - 400P.What is KGC's total cost function?

• A) TC = 50,030 + 30.005Q + 0.0025Q²
• B) TC = 50,000 + 50Q - 0.0025Q²
• C) TC = 20,000 - 400P
• D) TC = 50,000 + 30Q + 0.0025Q²

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Definitions:

Effective Interest Rate

The actual interest rate that a borrower pays or earns on a loan or investment, taking into account the effect of compounding.

Compounded Options

A financial derivative instrument that contains an option that itself has a feature making its payoff at least partially dependent on the future level of interest rates.

GICs

A kind of investment in Canada known as Guaranteed Investment Certificates that provide a promised return rate for a specified duration.

Nominal Annual Rates

The stated annual interest rate of a loan or investment, not accounting for compounding within the year.