Data are collected from eight firms regarding their costs in the last year, each firm

having the same level of fixed assets:

Total costs ($ million) 245 260 272 265 248 282 295 288

Output ('000 ) 31 35 38 36 32 40 44 42

a. Estimate an appropriate cost relationship.

b. A firm of the same type is aiming to produce 48,000 units next year; estimate

its total costs, stating any assumptions that you need to make.

c. Estimate average costs for the firm next year.

d. What can be said about returns to scale for the firms in this industry?

e. Estimate the marginal cost of the last unit produced by the firm next year.

f. Estimate the effect on costs for each firm in the industry of an increase in

output of 5,000 units.