Consider a competitive industry and a price-taking firm that produces in that industry. The market demand and supply functions are estimated to be: Demand: Qd = 10,000 ? 10,000P + 1.0MSupply: Qs = 80,000 + 10,000P ? 4,000PIwhere Q is quantity, P is the price of the product, M is income, and PI is the input price. The manager of the perfectly competitive firm uses time-series data to obtain the following forecasted values of M and PI for 2015: = $50,000 and I = $20 The manager also estimates the average variable cost function to beAVC = 3.0 ?

0.0027Q + 0.0000009Q2Total fixed costs will be $2,000 in 2015. Average variable cost reaches its minimum value of ________ units of output. 

A. 2,000
B. 1,500
C. 2,500
D. 1,000


Answer: B

Economics

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