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    fowlerkmike's Avatar
    fowlerkmike Posts: 1, Reputation: 1
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    #1

    Jul 14, 2009, 08:11 AM
    Micro cost curve calculation
    If Total Cost = Q^3-12Q^2+60Q what is your fixed cost?
    What is your variable cost?

    In a second power equation fixed cost would be the intercept but I don't see an intercept in the calculation. How do I calculate the other cost curves?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Jul 14, 2009, 01:40 PM
    Where total cost is expressed as a function of units (Q), you can easily determine the fixed costs by setting Q = 0. (Hint: It's not written into law that there must always BE fixed costs in a company's cost structure.)

    The other side of that coin (addressing your second question) is that any portion of the Total Cost equation which varies with Q is part of the variable cost. Note that in your Total Cost equation, all three terms of the formula have Q as a factor.

    In the latter part of your post you're correct that fixed cost would graphically be the vertical intercept of the curve. This is true for Total Cost functions of any degree, not just quadratics. It sounds like you're expecting to see some positive amount of fixed cost... if that's the case, go back to my earlier hint.

    Good luck with it.
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