1. Dubai Digital Enterprises, Inc. produces less than 1% of the world's supply of 32 MB random access memory (RAM) chips for electronic devices.DDE's RAM chips perform according to globally accepted performance standards for this type of chip (i.e., its chips are just like every other producers' chips).

DDE provides you with the following cost and output data for the past 18 months. Monthly output of chips is given in the second column, which is titled "Monthly production of finished product."Costs are reported in seven categories (some are fixed costs and some are variable costs).

Cost Items for Harding Silicon Enterprises, Inc.

Month

Monthly production of finished product

Energy expenses

Insurance premiums

Materials

Business licenses

Telephone and internet lines

Rent

Wage expense

Nov-98

175

1446

0

1938

0

189

714

2450

Dec-98

134

1023

0

1340

0

189

714

1799

Jan-99

335

2576.8

0

3259

1200

189

714

4621.2

Feb-99

231

1848

0

2257

0

189

714

3045

Mar-99

369

2844

440

3310

0

189

714

4906

Apr-99

330

2540

0

3246

0

189

714

4320

May-99

391

3128

0

3925.2

0

189

714

5496.8

Jun-99

569

4552

0

5482

0

189

714

7966

Jul-99

453

3448.8

0

4105.2

0

189

714

6245

Aug-99

694

5152

0

6835.2

0

166

714

9712.8

Sep-99

733

5744

440

7345.2

0

166

714

10018.8

Oct-99

750

6400

0

8515.2

0

166

714

10894.8

Nov-99

919

7452

0

9645.2

0

166

714

13282.8

Dec-99

812

6631

0

8219

0

166

714

11568

Jan-00

715

5480

0

6910

1440

166

840

10010

Feb-00

876

6892

0

8360

0

166

840

12264

Mar-00

1114

10920

490

16350

0

166

840

16430

Apr-00

1576.8

20592

0

18472

0

166

840

26036

The future estimated monthly total fixed cost (TFC) = 3,000

DDE has hired you to do undertake the following tasks:

1. Plot a scatter diagram of TVC on the vertical axis and Q on the horizontal axis.Does the scatter diagram suggest a functional form for TVC?Explain briefly.
2. Plot a scatter diagram of AVC on the vertical axis and Q on the horizontal axis.Does the scatter diagram suggest a functional form for AVC?Explain briefly.
3. Estimate a quadratic AVC function and write the estimated AVC, TVC, and SMC functions:

Note: make your approximation for the parameters as follows:

Intercept "a": 2 decimals.

b: 4 decimals

c: 6 decimals.

1. Evaluate the results of your regression equation.Specifically discuss: the significance of the model as a whole, goodness of fit (R²). Also discuss the statistical significance of the individual parameters and the algebraic signs of these parameters.
2. How many chips should DDE produced (monthly) if world chip prices are $32 per chip? Forecast the DDE's profit at this output level.
3. How many chips should be produced (monthly) if world chip prices are $55 per chip?Forecast the profit at this output level.
4. At what price should DDE shut down and produce no chips in the short run?