Straker Industries 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 Straker Industries is $820.
Adjusted R Square 0.710
Dependent variable = AVC
Coefficients Standard Error t Stat P-value
Intercept 41.80 4.04 10.35 0.000
Q -2.34 0.89 -2.64 0.017
Q^2 0.17 0.04 4.15 0.001
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 SMC. Graph one scatterplot of Q vs. TC, and another scatterplot of Q vs. ATC, AVC, and SMC.
c. When output is 16, how much is TC, AVC, ATC, and SMC?
d. At what amount of output does labor change from exhibiting increasing returns to decreasing returns?

Question

Straker Industries 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 Straker Industries is $820.
Adjusted R Square 0.710
Dependent variable = AVC
Coefficients Standard Error t Stat P-value
Intercept 41.80 4.04 10.35 0.000
Q -2.34 0.89 -2.64 0.017
Q^2 0.17 0.04 4.15 0.001
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 SMC. Graph one scatterplot of Q vs. TC, and another scatterplot of Q vs. ATC, AVC, and SMC.
c. When output is 16, how much is TC, AVC, ATC, and SMC?
d. At what amount of output does labor change from exhibiting increasing returns to decreasing returns?

Adjusted R Square	0.710
	Coefficients	Standard Error	t-Stat	P-value
INTERCEPT	41.80	4.04	10.35	0.0001
Q	-2.08	0.91	-2.29	0.0171
Q^2	0.20	0.04	4.76	0.0007

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