A study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function: (Source: Johnston, "Chapter 4," in Statistical Cost Analysis) AVC = 1.24 + 0.0033Q + Q = output; measured in millions of kWh per year Z = plant size; measured in thousands of kilowatts where AVC = average variable cost (i.e., working costs of generation), measured in pence per kilowatt-hour (kWh). (A pence was a British monetary unit equal, at that time, to 2 cents U.S.) What is the long-run total variable cost function for electricity generation? O +0.0033 +0.00000290 -0.000046Z - 0.026Z + 0.0001822 Q Q 1.24 0.00000290² O 0.0033 +20.00000290 -0.000046Z O 0.0033Q +20.00000290²-0.000046 QZ O 1.24Q +0.0033Q² +0.0000029Q³ - 0.000046Q²Z-0.026ZQ+0.00018Z²Q What is the long-run marginal cost function for electricity generation? O 0.0033Q +20.0000029Q² +0.000046 QZ O 1.24 +0.0066Q+0.0000087Q² -0.000092QZ-0.026Z+0.00018Z² 1.24 Q +0.0033 +0.0000029Q+0.000046Z+ 0.0001822 Q O 1.24Q +0.0033Q² +0.0000029Q³ +0.000046Q²Z+0.026ZQ+0.00018Z²Q O 1.39 -0.0036Q+0.0000029Q² O 1.24+0.0033Q+0.0000029Q² O 1.39 +0.0066Q+0.0000029Q² O 1.39-0.0072Q + 0.0000029Q² 0.000046 QZ 0.026Z Q O 1.24 +0.0033Q+0.0000029Q² + 0.026Z + 0.000182² Holding plant size constant at 150,000 kilowatts, what is the short-run average variable cost function for electricity generation? (Note: Z is measured in thousands of kilowatts) Holding plant size constant at 150,000 kilowatts, what is the short-run marginal cost function for electricity generation? (Note: Z is measured in thousands of kilowatts)
A study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function: (Source: Johnston, "Chapter 4," in Statistical Cost Analysis) AVC = 1.24 + 0.0033Q + Q = output; measured in millions of kWh per year Z = plant size; measured in thousands of kilowatts where AVC = average variable cost (i.e., working costs of generation), measured in pence per kilowatt-hour (kWh). (A pence was a British monetary unit equal, at that time, to 2 cents U.S.) What is the long-run total variable cost function for electricity generation? O +0.0033 +0.00000290 -0.000046Z - 0.026Z + 0.0001822 Q Q 1.24 0.00000290² O 0.0033 +20.00000290 -0.000046Z O 0.0033Q +20.00000290²-0.000046 QZ O 1.24Q +0.0033Q² +0.0000029Q³ - 0.000046Q²Z-0.026ZQ+0.00018Z²Q What is the long-run marginal cost function for electricity generation? O 0.0033Q +20.0000029Q² +0.000046 QZ O 1.24 +0.0066Q+0.0000087Q² -0.000092QZ-0.026Z+0.00018Z² 1.24 Q +0.0033 +0.0000029Q+0.000046Z+ 0.0001822 Q O 1.24Q +0.0033Q² +0.0000029Q³ +0.000046Q²Z+0.026ZQ+0.00018Z²Q O 1.39 -0.0036Q+0.0000029Q² O 1.24+0.0033Q+0.0000029Q² O 1.39 +0.0066Q+0.0000029Q² O 1.39-0.0072Q + 0.0000029Q² 0.000046 QZ 0.026Z Q O 1.24 +0.0033Q+0.0000029Q² + 0.026Z + 0.000182² Holding plant size constant at 150,000 kilowatts, what is the short-run average variable cost function for electricity generation? (Note: Z is measured in thousands of kilowatts) Holding plant size constant at 150,000 kilowatts, what is the short-run marginal cost function for electricity generation? (Note: Z is measured in thousands of kilowatts)
Chapter1: Making Economics Decisions
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Transcribed Image Text:A study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function: (Source:
Johnston, "Chapter 4," in Statistical Cost Analysis)
AVC = 1.24 + 0.0033Q + 0.00000290²
Q
= output; measured in millions of kWh per year
Z = plant size; measured in thousands of kilowatts
where AVC = average variable cost (i.e., working costs of generation), measured in pence per kilowatt-hour (kWh). (A pence was a British monetary
unit equal, at that time, to 2 cents U.S.)
What is the long-run total variable cost function for electricity generation?
1.24 +0.0033 +0.0000029Q -0.000046Z 0.026Z 0.000182²
Q
Q
Q
○ 0.0033 +20.0000029Q -0.000046 Z
O 0.0033Q +20.00000290² - 0.000046 QZ
O 1.24Q +0.0033Q² +0.0000029Q³ – 0.000046Q²Z – 0.026ZQ+0.00018Z²Q
What is the long-run marginal cost function for electricity generation?
0.000046 QZ
O 0.0033Q +20.0000029Q² +0.000046 QZ
O 1.24 +0.0066Q+0.0000087Q² - 0.000092QZ – 0.026Z+0.00018Z2
O +0.0033 +0.0000029Q+0.000046Z+
1.24
Q
0.026Z 0.0001822
+
Q
Q
O 1.24Q +0.0033Q² +0.0000029Q³ +0.000046Q²Z+0.026ZQ+0.00018Z²Q
O 1.39 -0.0036Q+0.0000029Q²
O 1.24 +0.0033Q+0.0000029Q²
O 1.39 +0.0066Q+0.0000029Q²
O 1.39-0.0072Q + 0.0000029Q²
0.026Z + 0.000182²
Holding plant size constant at 150,000 kilowatts, what is the short-run average variable cost function for electricity generation? (Note: Z is
measured in thousands of kilowatts)
O 1.24 +0.0033Q+0.0000029Q²
O 1.39 -0.0072Q+0.0000087Q²
O 1.39 +0.0066Q+0.0000029Q²
O 1.39 -0.0036Q+0.0000029Q²
Holding plant size constant at 150,000 kilowatts, what is the short-run marginal cost function for electricity generation? (Note: Z is measured in
thousands of kilowatts)
For a plant size equal to 150,000 kilowatts, what is the output level that minimizes short-run average variable costs?
year
At the output level thus obtained, the short-run average variable cost is ▼pence per kWh and the short-run marginal cost is
per kWh.
million kWh per
pence
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