Mr. Otto Carr, owner of Otto’s Autos, sells cars. Otto buys autos for $c each and has no other costs.
(a) What is his total cost if he sells 10 cars? What if he sells 20 cars? Write down the equation for Otto’s total costs assuming he sells y cars: TC(y) =
(b) What is Otto’s average cost function? Write down Otto’s marginal cost function.
(c) In the graph draw Otto’s average and marginal cost curves if c = 20.
(d) Suppose Otto has to pay $b a year to produce obnoxious television commercials. Otto’s total cost curve is now T C(y) =_________, his average cost curve is now AC(y) = ________, and his marginal cost curve is MC(y) =____.
(e) If b = $100, use red ink to draw Otto’s average cost curve on the graph in (c).