Suppose Caspian is a firm operating in a competitive market. The estimated its average variable cost function is shown below: + BQ + CQ2
The total fixed cost (TFC) = $1,000.
Dependent VARIABLEAVCR-SQUARE F-RATIOP-VALUE ON F
OBSERVATIONS 350.8713 108.30.0001
VARIABLE PARAMETER ESTIMATE STANDARD ERRORT-RATIOP-VALUE
INTERCEPT 43.4 13.8 3.140.0036
Q -2.8 0.9 -3.110.0039
Q2 0.2 0.05 40.0004
a) Are the estimated coefficients statistically important at the 5% level of significance?
b) Find out the total cost function.
c) Find out the equation for the ATC. Is it U-shaped? A simple yes/no is not sufficient. Use math.
d) Find out the shut-down price.
e) How much will the firm produce at market price of $53.4?