Answer in the following format:
(1)
Excel spreadsheets that shows all relevant work, calculations, and estimation
& (2) a Word of PDF document that contains the answers and output for all
questions. You should present enough information in the Word/PDF document so
that I could grade your assignment even without having access to your Excel
spreadsheet. Data: The data needed to perform all parts of this assignment are
in the provided Excel spreadsheet: cost_project.xlsx. The first worksheet
(“Cost data”) has two columns of data. “Quantity” represents the quantity of
the good produced and “Total Cost” represents the total cost of producing the
listed units of output. The second worksheet (“Graphing”) contains quantity
data and column headers that will be used for question #4.
QUESTIONS
1. Create an X-Y scatter plot (“Scatter with
only Markers”) with total cost on the vertical axis and output (Q) on the
horizontal axis.
2. Using this scatter plot, determine
approximately when (i) increasing returns appears to “end” and (ii) when
diminishing returns appears to begin. In other words, visually, when does it
appear that increasing returns stops and when does it appear that diminishing
returns begins? You do not need an exact answer but give an eyeball
approximation.
3. Using Excel, please estimate a cubic cost
function:
a. Discuss the significance of the
coefficients. Are they the expected sign?
b. How is the overall fit of the model?
4. Now turn to the second worksheet in the
Excel file (“Graphing”). We are going to use the estimates to create some cost
curves. Before we can construct a graph, however, we need to fill in the values
in the table. For each of the given quantities, I would like you to USE THE
ESTIMATES from question #3 to fill in the blanks for total cost, average
variable cost, average total cost, and marginal cost. Hint: Appendix 7A has
some useful equations that should help you complete this task.
5. From the table you constructed in the
“Graphing” worksheet, what is the firm’s fixed cost? Hint: what is the firm’s
total cost when they produce zero units of output?
6. Use the table from question #4 to create an
X-Y scatter plot (“Scatter with Straight Lines”). Cost measures should be on
your vertical axes while quantity will be measured on the horizontal axis. In
order to make the shapes of the curves easier to see, limit the maximum value
on the vertical axis to $20.
7. Suppose that this firm operates in a
perfectly competitive market. If the market price in this perfectly competitive
market is $11 how much output would the firm choose to produce? How much
profit/loss would they earn?
8. From the firm’s cost curves, what is the
“shutdown point” for this firm? In other words, below what price would the
perfectly competitive firm choose to shutdown?
ScholarMatic: Explanation & Answer
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