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 a) If Argus Corporation produces 8,000 vacuum cleaners per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost? ( b) Answer part a, assuming that Argus produces 10,000 vacuum cleaners monthly.
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 |
a) If Argus Corporation produces 8,000 vacuum cleaners per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost? (
b) Answer part a, assuming that Argus produces 10,000 vacuum cleaners monthly.
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