Question

Week	AVC ($)	Q_S1
1	20.52	616
2	20.54	612
3	20.54	582
4	20.55	549
5	20.54	618
6	20.51	681
7	20.50	644
8	20.58	630
9	20.54	546
10	20.60	526
11	20.50	684
12	20.49	660
13	20.52	644
14	20.56	616
15	20.53	629
16	20.55	634
17	20.54	686
18	20.50	709
19	20.52	632
20	20.54	568
21	20.52	584
22	20.51	612
23	20.54	600
24	20.52	575
25	20.54	562
26	20.51	592
27	20.63	457
28	20.55	508
29	20.56	487
30	20.58	467
31	20.62	446
32	20.59	478
33	20.56	500
34	20.57	490
35	20.54	565
36	20.54	556
37	20.51	610
38	20.52	623
39	20.51	615
40	20.52	670
41	20.54	671
42	20.49	707
43	20.48	779
44	20.50	731
45	20.53	733
46	20.49	763
47	20.50	722
48	20.47	739
49	20.49	747
50	20.48	766
51	20.50	696
52	20.48	722

Estimate the cost function for Average Variable Cost (AVC).

Estimate the AVC (Average Variable Cost) function

Answer 1

The cost function for AVC would be of the form AVC = a+b*quantity

By running linear regression in excel we get the results as below

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.8326
R Square	0.6933
Adjusted R Square	0.6872
Standard Error	0.0198
Observations	52
ANOVA
	df		SS	MS	F	Significance F
Regression	1		0.0442	0.0442	113.0227	0.0000
Residual	50		0.0196	0.0004
Total	51		0.0638
	Coefficients		Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	20.7399		0.0199	1040.3159	0.0000	20.6999	20.7800
Q_S1	-0.0003		0.0000	-10.6312	0.0000	-0.0004	-0.0003

So, AVC = 20.74-0.0003*Quantity