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

question 6

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.
$$\begin{array} { r l l l l l } \text { DEPENDENTVARIAELE: } & \text { AVC } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ON F } \\\text { OESERVATIONS: } & \text { 35 } & \mathbf { 0 . 8 7 1 3 } & 108.3 & \mathbf { 0 . 0 0 0 1 } & \\& & \begin{array} { l } \text { PARAMETER }\end{array} & \text { STANDARD } & & \\\text { VARIAELE } & & \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & & 43.40 & 13.80 & \mathbf { 3 . 1 4 } & \mathbf { 0 . 0 0 3 6 } \\\text { Q } & & - \mathbf { 2 . 8 0 } & \mathbf { 0 . 9 0 } & - \mathbf { 3 . 1 1 } & \mathbf { 0 . 0 0 3 9 } \\\text { Q2 } & & \mathbf { 0 . 2 0 } & \mathbf { 0 . 0 5 } & 4.00 & \mathbf { 0 . 0 0 0 4 }\end{array}$$
-If Straker Industries produces 20 units of output, what is estimated total cost (TC) ?

• A) $1,348
• B) $1,498
• C) $2,348
• D) $4,428

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Definitions:

Liquidator's Fee

Charges or payments made to a liquidator for the process of winding up a company, disposing of its assets, and discharging its liabilities.

Voluntary Winding Up

A process initiated by a company's shareholders to dissolve the company in an orderly manner, liquidating assets to pay creditors and distributing any remaining assets.

Company's Members

Individuals or entities that have an ownership interest in a corporation, commonly referred to as shareholders or stockholders.

ASIC

The Australian Securities and Investments Commission; an independent Australian government body that acts as the corporate regulator.