Answered: You collect the following production…

You collect the following production data for your firm: Q L 196 2 1,155 6 443 3 62 1 1,114 9 712 5 1,045 7 631 4 903 11 1,232 10

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

Chapter4A: Problems In Applying The Linear Regression Model

Section: Chapter Questions

Problem 2E

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Question

You collect the following production data for your firm:

Q	L
196	2
1,155	6
443	3
62	1
1,114	9
712	5
1,045	7
631	4
903	11
1,232	10

a. Which functional form (linear, quadratic, cubic) is most suitable to your data? Construct a scatter diagram but be sure to just do the dots; don’t include the lines that connect them. Then, play around with the trendline feature and include what you consider to be the best trendline.

b. Using OLS, estimate the firm’s short-run production function. Comment on the strength of the regression results.

c. Calculate the Q, AP, and MP for L = 8 workers.

d. At 8 workers, is MC rising or falling, and how do you know?

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