Estimating and predicting cost, Microeconomics

Assignment Help:

Estimating and Predicting Cost

* Estimates of future costs can be obtained from a cost function, which relates cost of production to level of output and other variables which the firm can control.

*  Assume that we wanted to derive total cost curve for automobile production.

Total Cost Curve for Automobile Industry

1040_cost curve1.png

Estimating and Predicting Cost

* A linear cost function (does not show U-shaped characteristics) might be:

1295_estimating cost.png
The linear cost function is applicable if marginal cost is constant. 

- Marginal cost can be represented by β. 

* If we wish to allow for a U-shaped average cost curve and a marginal cost which is not constant, we might use quadratic cost function:
 If the marginal cost curve is not linear in nature, we may use a cubic cost function:

2359_estimating cost1.png

797_estimating cost2.png

1053_estimating cost3.png


Related Discussions:- Estimating and predicting cost

Define average total cost and average variable cost, Define Average Total C...

Define Average Total Cost and Average Variable Cost Average Total Cost:    The amount spent on producing every unit of output. The average cost is calculated by dividing the t

A period of transition and improvement, A Period of Transition and Improvem...

A Period of Transition and Improvement: These few years stand out as the golden years for India's BOP. India had a small current account surplus (0.6 per cent of the GDP on an

PPC help, I don''t understand PPC at all

I don''t understand PPC at all

Describe stabilisation policies as by the imf, Describe stabilisation polic...

Describe stabilisation policies as by the International Monetary Fund (IMF). Define stabilisation policies as basically a list of demands set forward by the IMF to a debtor nat

What are price ceilings and price floors, 1. Explain what are price ceiling...

1. Explain what are price ceilings and price floors and how they effect the market for a good or service. Also show through graphs, if they cause any inefficiencies in a perfectly

Find out the budget constraint, 1. Suppose that there is a credit market im...

1. Suppose that there is a credit market imperfection because of asymmetric information. In the economy, there are N consumers. A fraction b of consumers consists of lenders, who e

Excess capacity, the prevalence of excess capacity is the direct consequenc...

the prevalence of excess capacity is the direct consequence of the existence of monopolistic competition

Approach of characterizing modern economic environment, Explain the approac...

Explain the approach of characterizing the modern economic environment. Modern economics gives various perspectives or angles to seem at real world economic issues. An economic

The free enterprise: price system, The Free Enterprise:  Price System ...

The Free Enterprise:  Price System The free market system is where the decision about what is produced is the outcome of millions of separate individual decisions made by cons

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd