1.You collect the following production data for your firm:

Q L

301 2

1,436 6

632 3

69 1

1,813 9

1,078 5

1,961 7

797 4

1,869 11

2,353 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?

2.

Smelling of Tulips, Inc., a perfume company, estimated its short-run costs using a U-shaped average variable cost function of the form and obtained the following results.Total fixed cost (TFC) at S.T. Inc. is $1290.

Adjusted R Square 0.809

Coefficients Stndrd Error t Stat P-value

Intercept 47.66 3.29 14.49 0.0001

Q -4.67 0.72 -6.48 0.0000

Q^2 0.26 0.03 7.79 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 14, how much is TC, AVC, ATC, and MC?

d.At what amount of output does labor change from exhibiting increasing returns to decreasing returns?