13 Managerial Economics Name of the Student Name of the University

Running head: MANAGERIAL ECONOMICS
Managerial Economics
Name of the Student
Name of the University
Author note

1MANAGERIAL ECONOMICS
Table of Contents
Answer 1....................................................................................................................................2
Answer a.................................................................................................................................2
Answer b....................................................................................................................................3
Answer c.....................................................................................................................................3
Answer 2....................................................................................................................................4
Answer a.................................................................................................................................4
Answer b................................................................................................................................6
Answer b................................................................................................................................6
Answer c.................................................................................................................................7
Answer 3....................................................................................................................................9
Answer 4....................................................................................................................................9
Answer a.................................................................................................................................9
Answer b..............................................................................................................................10
Answer 5..................................................................................................................................10
Answer a...............................................................................................................................10
Answer b..............................................................................................................................10
Answer 6..................................................................................................................................10
Answer 7..................................................................................................................................12

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Answer 1
Answer a
Regression Statistics
Multiple R 0.80
R Square 0.63
Adjusted R Square 0.60
Standard Error 7.73
Observations
26.0
0
ANOVA
df
SS
MS
F Significance F
Regression 2.00 2387.50 1193.75 19.97 0.00
Residual 23.00 1374.54 59.76
Total 25.00 3762.04
Coefficient
s
Standard
Error t Stat
P-
value
Lower
95%
Upper
95%
Intercept 152.881 6.605
23.14
6 0.000 139.217 166.544
Q -0.061 0.015 -4.199 0.000 -0.092 -0.031
Q2 0.00002 0.000 2.693 0.013 0.000 0.000
The regression output describes the relation between average variable cost and level of
output. The co-efficient of Q is -0.061. The implication of the negative sign before the
coefficient is that as output increases initially average variable cost reduces. The statistical
significant of regression co efficient is determined by looking at the corresponding P value. If
p value is less than 0.05 then the variable is said to be statistically significant at 5% level of
significance. Here, p value for Q comes out as 0.0000. Therefore, Q is a significant
determinant of average variable cost. The estimated coefficient of Q2 is 0.00002. The positive
sign depicts a positive relation between cost and output growth. This means a larger Q2

3MANAGERIAL ECONOMICS
increases average variable cost. Coming to its statistical significance, the variable is
statistically significant as its p value is less than 0.05.
Answer b
From the regression result the average variable cost function is estimated as
AVC=152.881−0.061Q+0.00002 Q2
Now,
Total Variable Cost (TVC )= AVC∗Q
Therefore,
TVC =Q(a+ bQ+C Q2)
¿ Q(152.881−0.061Q+0.00002 Q2)
¿ 152.881Q−0.061 Q2+ 0.00002Q3
Marginal cost presents the additional cost of producing one additional unit. From the total
average variable cost function the marginal cost function is obtained as
MC= d (TVC )
dQ
¿ d (152.881Q−0.061Q2 +0.00002 Q3)
dQ
¿ 152.881−0.122 Q+0.00006 Q2
Answer c
AVC = 152.881 – 0.061Q + 0.00002Q2