Refer to the Cost Regression for Straker Industries Shown Below $$A V C = a + b Q + c Q ^ { 2 }$$

question 52

Multiple Choice

Refer to the cost regression for Straker Industries shown below.
Straker Industries estimated its short-run costs using a U-shaped average variable cost function of the form

$$A V C = a + b Q + c Q ^ { 2 }$$
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$
-The estimated short-run marginal cost function (SMC) at Straker Industries is:

• A) \(S M C = 43.4 Q - 1.4 Q ^ { 2 } + 0.07 Q ^ { 3 }\)
• B) \(S M C = 43.4 - 1.4 Q + 0.07 Q ^ { 2 }\)
• C) \(S M C = 43.4 Q - 5.6 Q ^ { 2 } + 0.6 Q ^ { 3 }\)
• D) \(SM C = 43.4 - 5.6 Q + 0.6 Q ^ { 2 }\)

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Definitions:

Dividends

Distributions of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders, typically in the form of cash, stocks, or other assets.

Accrued Interest

Interest that has been earned but not yet received in cash or recorded, representing a liability for the payer and an asset for the receiver.

Semiannual Interest

Interest calculated and disbursed semi-annually.

Bonds

Fixed income investments representing loans made by an investor to a borrower, typically corporate or governmental, which are expected to be paid back with interest.