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Question

The cost CC, in millions of dollars, of producing qq items is given by C=5.7+0.002qC=5.7+0.002q .Interpret the 5.7 and the 0.002 in terms of production. Give units.

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For the given formula C=5.7+0.002qC=5.7+0.002q where the cost CC is measured in millions of dollars, the vertical intercept is 5.75.7.This means that the fixed cost\textbf{fixed cost} of production is 5.75.7 millions of dollars.

The slope of the cost function is 0.0020.002.This means that the variable cost\textbf{variable cost} is 0.0020.002 million dollars per unit(or 0.0021,000,000=$2,0000.002\cdot 1,000,000=\$2,000 per unit).

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