Suppose that each firm that operates in an industry has a total cost curve given

Question

Suppose that each firm that operates in an industry has a total cost curve given by TC = 7,000 + 50Q. In this industry, the lowest average total cost of producing 1,000 units of output occurs when: four firms each produce 250 units of output. ten firms each produce 100 units of output. one firm produces all 1,000 units of output. two firms each produce 500 units of output. Suppose that each firm that operates in an industry has a total cost curve given by TC = 7,000 + 50Q. In this industry, the lowest average total cost of producing 1,000 units of output occurs when: four firms each produce 250 units of output. ten firms each produce 100 units of output. one firm produces all 1,000 units of output. two firms each produce 500 units of output.

Explanation / Answer

Average total cost=Total cost/Q

ATC=7000/Q+50

Hence ATC is lowest when only one firm produces 1000 units.

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