1.Consider estimation of a short-run average variable cost function of the form:

AVC = a+ bQ + cQ²

The computer printout for the regression analysis is:

DEPENDENT VARIABLE:AVC

R-SQUARE

F-RATIO

P-VALUE ON F

OBSERVATIONS:23

0.9500

190.0

0.00012

VARIABLE

PARAMETER ESTIMATE

STANDARD ERROR

T-RATIO

P-VALUE

INTERCEPT

150.00

30.00

3.00

0.3123

Q

-3.25

0.50

-6.50

0.0061

Q²

0.96

0.24

4.00

0.0032

a. Determine whether the estimated values of the coefficients indicate a U-shaped AVC curve at the 5 percent level of significance.Why?

Answer:

b. Use this estimated AVC function to obtain the marginal cost function. Is the MC function U-shaped?

Answer:

c. At what level of output is MC = AVC?