Question
BlueHoof, the popular new startup company that manufacturers the world's first-ever Bluetooth-enabled horseshoe, estimated its short-run costs using a U-shaped average variable cost function of
BlueHoof, the popular new startup company that manufacturers the world's first-ever Bluetooth-enabled horseshoe, 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 BlueHoof is $920.
Adjusted R Square | 0.922 | |||
Coefficients | Standard Error | t Stat | P-value | |
Intercept | 35.36 | 2.64 | 13.42 | 0.0009 |
Q | -3.64 | 0.58 | -6.30 | 0.0000 |
Q^2 | 0.25 | 0.03 | 9.35 | 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 4, how much is TC, AVC, ATC, and MC?
d. At what amount of output does labor change from exhibiting increasing returns to decreasing returns?
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