Assume Caspian is a firm operating in a competitive market - 39861

Solution Posted by
Solution Detail
Price: $7.00
  • From: Mathematics,
  • Posted on: Fri 27 Dec, 2013
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

Assume Caspian is a firm operating in a competitive market. The estimated its average variable cost function is shown below: AVC = A + BQ + CQ2

The total fixed cost (TFC) = $1,000.
Dependent VARIABLE AVC R-SQUARE F-RATIO P-VALUE ON F
OBSERVATIONS 35 0.8713 108.3 0.0001
VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE
INTERCEPT 43.4 13.8 3.14 0.0036
Q -2.8 0.9 -3.11 0.0039
Q2 0.2 0.05 4 0.0004

a. Are the estimated coefficients statistically significant at the 5% level of significance? 
b. Find the total cost function.
c. Find the equation for the ATC. Is it U-shaped? A simple yes/no is not enough. Use math.
d. Find the shut-down price.
e. How much will the firm produce at the market price of $53.4?

 

Solution Description

(a) p- values of the coefficients are < 0.05. Hence they are significant at 5% level of significance.

(b) AVC = 43.4 - 2.8Q + 0.2Q^2