Average Variable Cost Analysis

The video tutorial explains how to determine the output level at which the average variable cost (AVC) is minimized for a perfectly competitive firm. It begins by introducing the problem and the given cost function. The tutorial then breaks down the total cost into fixed and variable components, leading to the calculation of the average variable cost. A graphical representation of the AVC curve is provided, followed by a mathematical derivation using calculus to find the output level where the AVC is at its minimum, which is determined to be 100 units.

What is the main objective of the problem discussed in the video?

• To identify the fixed cost

• To find the maximum profit level

• To calculate the total revenue

• To determine the output level where average variable cost is minimized

Which component of the total cost function is considered fixed?

• 100

• 0.05Q^3

• 10Q^2

• 600Q

How is the variable cost derived from the total cost function?

• By subtracting fixed cost from total cost

• By adding all cost components

• By multiplying total cost by output

• By dividing total cost by output

What does the average variable cost function represent?

• Variable cost per unit of output

• Fixed cost per unit of output

• Total cost per unit of output

• Total revenue per unit of output

What is the significance of the minimum point on the average variable cost curve?

• It represents the highest total cost

• It shows the lowest average variable cost

• It indicates the maximum profit

• It marks the point of zero profit

What is the first step in finding the minimum point of the average variable cost?

• Graph the total cost function

• Determine the fixed cost

• Find the derivative of the average variable cost function

• Calculate the total cost

What is the derivative of a constant term in the average variable cost function?

• 1

• 0

• The constant itself

• The constant divided by output

What is the output level where the average variable cost is minimized?

• 100

• 50

• 150

• 10