Smelling of Tulips, Inc., a perfume company, estimated its short-run costs using a U-shaped average variable cost...

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Economics

Smelling of Tulips, Inc., a perfumecompany, estimated its short-run costs using a U-shaped averagevariable cost function of the form and obtained the followingresults. Total fixed cost (TFC) at S.T. Inc. is$1,250.
Adjusted R Square
0.758
Coefficients
Standard Error
t Stat
P-value
Intercept
32.52
2.33
13.95
0.0008
Q
-1.39
0.51
-2.72
0.0146
Q^2
0.10
0.02
4.23
0.0006
a.Â Â Â What level ofoutput (Q) is associated with the minimum AVC? What is the value ofAVC at this minimum?
b.Â Â Â Determineequations for ATC, TC, and MC. Graph one scatterplot of Q vs. TC,and another scatterplot of Q vs. ATC, AVC, and MC.
c.Â Â Â When output is 9,how much is TC, AVC, ATC, and MC?
d.Â Â Â At what amount ofoutput does labor change from exhibiting increasing returns todecreasing returns?

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4.0 Ratings (725 Votes)

a The regression equation for AVC isAVC 3252 139Q 010Q2To obtain the minimum AVC we differentiate the AVC wrt QdAVCdQ 139 020Q 0 Q 695 or Q 7b We know TFC 1250 Therefore AFC is 1250QATC Average Fixed Cost AFC See Answer

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Adjusted R Square	0.758
	Coefficients	Standard Error	t Stat	P-value
Intercept	32.52	2.33	13.95	0.0008
Q	-1.39	0.51	-2.72	0.0146
Q^2	0.10	0.02	4.23	0.0006