Managerial Economics | Assignment-1

Running head: MANAGERIAL ECONOMICS
Managerial Economics
Name of the Student
Name of the University
Course ID

MANAGERIAL ECONOMICS1
Table of Contents
Question 1........................................................................................................................................2
Question a....................................................................................................................................2
Question b....................................................................................................................................3
Question c....................................................................................................................................3
Question 2........................................................................................................................................4
Question b....................................................................................................................................5
Question c....................................................................................................................................7
Question 3........................................................................................................................................9
Question 4........................................................................................................................................9
Question a..................................................................................................................................10
Question b..................................................................................................................................10
Question 5......................................................................................................................................10
Question a..................................................................................................................................11
Question b..................................................................................................................................11
Question 6......................................................................................................................................11
Question 7......................................................................................................................................12
References......................................................................................................................................15

MANAGERIAL ECONOMICS2
Question 1
Question a
Table 1: Regression estimation for AVC
AVC=152.88−0.0614 Q+0.00002 Q2
The statistical significance of the parameters of regression estimates can be examined
from the obtained p value of each estimates. The respective p values for the intercept, coefficient
of Q and that of the coefficient of Q square are 0.0000, 0.0003 and 0.0130. P values of each of
the coefficient is less than statistical significance level at 5%. This implies rejection of null
hypothesis that the coefficient is statistically significant (Schroeder, Sjoquist & Stephan, 2016).
There the three estimated parameters are statistically significant corresponding to 5%
significance level.

MANAGERIAL ECONOMICS3
The estimated intercept is 152.88. The intercept is positive implying that at zero level of
production the company has to incur a positive average variable cost. The estimated coefficient
for Q is -0.0614. The negative coefficient of Q suggests that an increase in production reduces
average variable cost. The estimated coefficient for Q square is 0.00002. The coefficient is
positive. The positive sign of coefficient suggests that as production increases at a faster rate
average variable cost starts to increase.
Question b
Average Variable Cost ( AVC )=152.88−0.0614 Q+0.00002 Q2
Total Variable Cost (TVC )= AVC ×Q
¿ ( 152.88−0.0614 Q+0.00002Q2 ) × Q
¿ 152.88 Q−0.0614 Q2 +0.00002 Q3
Marginal Cost ( MC )= d ( TVC )
dQ
¿ 152.88−0.1228Q+ 0.00006Q2
Question c
The first order condition for minimizing AVC
d ( AVC )
d ( Q ) =0
¿ ,−0.0614+0.000044 Q=0
¿ , 0.000044 Q=0.0614