Managerial Economics Case Study

MANAGERI
AL
ECONOMIC
S
CASE STUDY
[DATE]
STUDENT NAME
STUDENT ID:

INTRODUCTION
The given case pertains to Harding Silicon Enterprises (HSE) which is in the business of
producing RAM chips for electronic devices. The company has provided data related to cost
and output for the past 19 months. The various cost are divided into seven categories with
some costs being fixed while the other variable. The objective of this report is to carry out a
statistical analysis of the short term production costs so as to estimate different cost functions
such as AVC (Average Variable Cost) and TVC (Total Variable Cost). For the chip prices in
two different scenarios, the production level also has been estimated along with the
forecasted profit. Finally the price in the short run which would result in shut down of
operations also has been computed.
ANALYSIS
Question 1
(a) Total variable cost (TVC)
The requisite
formulae that have
been used in
computation are given below (Mankiw, 2015).
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1) TVC = Material expenses + Telephone bills + Energy expenses +Wage expenses
2) Average variable cost (AVC) is defined below.
AVC= Total variable cost (TVC )
Monthly production of finished product ( Q )
(b) Scatter diagram between Q and TVC has been drawn.
Dependent variable: Total variable cost (TVC)
Independent variable: Monthly production of finished product (Q)
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