Suppose a farmer is a price taker in soybeans with cost functions given by ?
TC = .1q² + 2q + 30
MC = .2q + 2
Suppose the farmer has to purchase a license for $50 per period in order to stay in business. In this case,its new total cost function is

Question

Quizplus · Accepted Answer

The license fee of $50 adds a fixed cost to the farmer's cost function. Therefore, the new cost function is TC = .1q² + .2q + 50 + 30 (the original cost function + the license fee). Simplifying yields TC = .1q² + .2q + 80.

Suppose a Farmer Is a Price Taker in Soybeans with Cost