Table below describes short-run AVC (Average Variable Cost) function in the form
ID: 1107128 • Letter: T
Question
Table below describes short-run AVC (Average Variable Cost) function in the form: AVC = a + bQ + cQ2
Dep. Var.: AVC
R-Square
F-Ratio
P-value on F
Obs.: 43
0.6316
55.91
0.0001
Variable
Para. Est.
Std. Err.
T-Ratio
P-value
Intercept
665.124
138.568
4.80
0.0002
Q
-0.16458
0.09738
-1.69
0.0925
Q2
0.00079
0.00028
2.82
0.0001
1. Formulate the regression model (AVC function) based on the estimates. If Flextronics produces the output level at 100, what is the estimated AVC? (Show Steps)
Dep. Var.: AVC
R-Square
F-Ratio
P-value on F
Obs.: 43
0.6316
55.91
0.0001
Variable
Para. Est.
Std. Err.
T-Ratio
P-value
Intercept
665.124
138.568
4.80
0.0002
Q
-0.16458
0.09738
-1.69
0.0925
Q2
0.00079
0.00028
2.82
0.0001
Explanation / Answer
Using the coefficients obtained above.
AVC = 665.124-0.164Q+0.00079Q2
If Q = 100 Put in AVC
AVC =656.124
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