The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for vacuum cleaners using an average variable cost function of the form AVC = a + bQ + cQ2 where AVC = dollars per vacuum cleaner and Q = number of vacuum cleaners produced each month. Total fixed cost each month is $180,000. The following results were obtained: DEPENDENT VARIABLE: AVC R-SQUARE F-RATIO P-VALUE ON F OBSERVATIONS: 19 0.7360 39.428 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 191.93 54.65 3.512 0.0029 Q -0.0305 0.00789 23.866 0.0014 Q2 0.0000024 0.00000098 2.449 0.0262 b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know?
The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for vacuum cleaners using an average variable cost function of the form AVC = a + bQ + cQ2 where AVC = dollars per vacuum cleaner and Q = number of vacuum cleaners produced each month. Total fixed cost each month is $180,000. The following results were obtained: DEPENDENT VARIABLE: AVC R-SQUARE F-RATIO P-VALUE ON F OBSERVATIONS: 19 0.7360 39.428 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 191.93 54.65 3.512 0.0029 Q -0.0305 0.00789 23.866 0.0014 Q2 0.0000024 0.00000098 2.449 0.0262 b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 3E
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2. The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for vacuum cleaners using an
DEPENDENT VARIABLE: | AVC | R-SQUARE | F-RATIO | P-VALUE ON F |
OBSERVATIONS: | 19 | 0.7360 | 39.428 | 0.0001 |
VARIABLE | PARAMETER ESTIMATE | STANDARD ERROR | T-RATIO | P-VALUE |
INTERCEPT | 191.93 | 54.65 | 3.512 | 0.0029 |
Q | -0.0305 | 0.00789 | 23.866 | 0.0014 |
Q2 | 0.0000024 | 0.00000098 | 2.449 | 0.0262 |
b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know?
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