Question: Consider the following short-run average variable cost function.

AVC = a + b Q + c Q ²

Using time-series data, ordinary least squares produces the following estimates.

1. What is the estimated average variable cost function (AVC)?
2. What is the estimated total variable cost function (TVC)?
3. What is the estimated marginal cost function (SMC)?
4. Which parameter estimates have the theoretically correct signs?
5. At Q=50, what are TVC, AVC, and SMC?
6. At Q=50, is AVC increasing or decreasing?
7. At what level of output does AVC reach its minimum?
8. Using the answer from j, if the firm incurs a total fixed cost of $30,000, what is TVC and TC at that level of output?

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