2. PewTooth®, the popular new startup company that manufactures the world's first-ever Bluetooth- enabled church bench, estimated its short-run costs using a U-shaped average variable cost function of the form AVC = a +bQ+cQ² and obtained the following results. Total fixed cost (TFC) at PewTooth® is $1,140. Adjusted R Square Intercept Q Q^2 0.853 Coefficients 37.94 -3.45 0.24 Standard Error 3.51 0.77 0.04 t Stat 10.81 -4.48 6.74 P-value 0.0004 0.0003 0.0000 a. What level of output (Q) is associated with the minimum AVC? What is the value of AVC at this minimum? b. Determine equations for ATC, TC, and MC. Graph one scatterplot of Q vs. TC, and
2. PewTooth®, the popular new startup company that manufactures the world's first-ever Bluetooth- enabled church bench, estimated its short-run costs using a U-shaped average variable cost function of the form AVC = a +bQ+cQ² and obtained the following results. Total fixed cost (TFC) at PewTooth® is $1,140. Adjusted R Square Intercept Q Q^2 0.853 Coefficients 37.94 -3.45 0.24 Standard Error 3.51 0.77 0.04 t Stat 10.81 -4.48 6.74 P-value 0.0004 0.0003 0.0000 a. What level of output (Q) is associated with the minimum AVC? What is the value of AVC at this minimum? b. Determine equations for ATC, TC, and MC. Graph one scatterplot of Q vs. TC, and
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
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 9E
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Transcribed Image Text:2. PewTooth®, the popular new startup company that manufactures the world's first-ever Bluetooth-
enabled church bench, estimated its short-run costs using a U-shaped average variable cost function
of the form AVC = a +bQ+cQ² and obtained the following results. Total fixed cost (TFC) at
PewTooth® is $1,140.
Adjusted R Square
Intercept
Q
Q^2
0.853
Coefficients
37.94
-3.45
0.24
Standard
Error
3.51
0.77
0.04
t Stat P-value
10.81
0.0004
-4.48
0.0003
6.74
0.0000
a. What level of output (Q) is associated with the minimum AVC? What is the value of AVC
at this minimum?
b. Determine equations for ATC, TC, and MC. Graph one scatterplot of Q vs. TC, and
another scatterplot of Q vs. ATC, AVC, and MC.
c. When output is 12, how much is TC, AVC, ATC, and MC?
d.
At what amount of output does labor change from exhibiting increasing returns to
decreasing returns?
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