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It costs a company $30,000 to begin production of a good, plus$3 for every unit of the good produced. Let x be the number of units produced by the company.
(a) Find a formula for , the total cost for the production of units of the good.
(b) Find a formula for the company's average cost per unit, .
(c) Graph for . Label the horizontal asymptote.
(d) Explain in economic terms why the graph of has the long-run behavior that it does.
(e) Explain in economic terms why the graph of has the vertical asymptote that it does.
(f) Find a formula for . Give an economic interpretation of .
(g) The company makes a profit if the average cost of its good is less than per unit. Find the minimum number of units the company can produce and make a profit.
Solution
Verified(a)
The total cost ) = (variable cost) + (fixed cost). The variable cost varies with , the number of units produced.
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