a) Are the estimates ˆa, ˆb, and cˆ statistically significant at the 2 percent level of significance? Which is/are significant and which is/are not? b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know? c) If Argus Corporation produces 8,000 vacuum cleaners per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost? d) Answer part c, assuming that Argus produces 10,000 vacuum cleaners monthly. e) At what level of output will average variable cost be at a minimum? What is the minimum average variable cost?
Given: Q = -0.0250 L3 + 1.5 L2
The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for vacuum cleaners using an
a) Are the estimates ˆa, ˆb, and cˆ statistically significant at the 2 percent level of significance? Which is/are significant and which is/are not?
b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know?
c) If Argus Corporation produces 8,000 vacuum cleaners per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost?
d) Answer part c, assuming that Argus produces 10,000 vacuum cleaners monthly.
e) At what level of output will average variable cost be at a minimum? What is the minimum average variable cost?
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