estimate the parameters for the empirical cost function
Consider you own a small restaurant business. You collected data on the average variable costs of y Show more Consider you own a small restaurant business. You collected data on the average variable costs of your business for the past 12 months. You have adjusted the cost data for inflation by deflating with an appropriate price index. Your output (Q) and the associate average variable cost (AVC) data are presented below: (20 pts) Obs Q AVC 1 22 $208 2 31 202 3 31 206 4 25 214 5 41 174 6 41 203 7 45 172 8 45 158 9 45 173 10 62 170 11 62 152 12 70 175 a. Use the data to run the appropriate regression to estimate the parameters for the empirical cost function: AVC a + bQ + cQ 2 (Paste your computer printout here) b. Using a 10 percent significance level discuss suitability of the parameter estimates obtaine in part a. Consider both the algebraic signs and statistical significance of the parameter estimates. c. Present the estimated average variable cost total variable cost and short-run marginal cost functions. d. At what level of output does AVC reach its minimum value? What is the minimum value of AVC at its minimum? Show less
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