Dans pizza company has a total variable cost functionTVC = 5Q +.pdf

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Dan\'s pizza company has a total variable cost function: TVC = 5Q + (Q^2/80) MC = 5 + Q/40 Find the efficient scale of production and minimum AVC when avaoidable fixed cost is $845 per day. Solution Efficient scale of production is where MC meets AC TC= TVC + FC TC= 5Q+Q2 / 80 +845 AC = 5+Q/80 MC = 5+Q/40 AC= MC 5+Q/80 = 5 +Q/40 Q/2 = 0 Q=0 Minimum AVC TVC = 5Q+Q2/80 AVC = 5+Q/80 Q=0 = minimum There is no output where we will find AC minimum. We can see from the equation for all positive Q, the cost increases with increase in output..

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