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

Due diligence, Due Diligence The investigative procedure an investor s...

Due Diligence The investigative procedure an investor should conduct into the operations and business strategy assumptions of an organization soliciting investors.

Describing risk, Describing Risk * To measure risk we should know:  ...

Describing Risk * To measure risk we should know:  1) All the outcomes which are possible.  2) The probability that each outcome will occur. * Interpreting Probability

Components of a time series, 1-      a-  What are the five components of a...

1-      a-  What are the five components of a time series? b- Briefly explain how you would estimate each component. c- What does deterministc trend mean?  How do you detren

Floating exchange rates, Floating exchange rates There are two basic s...

Floating exchange rates There are two basic systems that can be used to determine the exchange rate between one country's currency and another's: a floating exchange rates (al

Rule of thumb method, Rule of Thumb Method Sir Ashby had been requeste...

Rule of Thumb Method Sir Ashby had been requested in 1960 by the Government of Nigeria to submit a report on manpower development in Nigeria. In doing so, in the absence of re

International trade, discuss the methods used by the malaysian government t...

discuss the methods used by the malaysian government to slow down import growth.

DEMAND FUNCTIONS, SUPPOSE A MONOPOLIST FACES A DEMAND CURVE OF D(P)=10-P AN...

SUPPOSE A MONOPOLIST FACES A DEMAND CURVE OF D(P)=10-P AND HAS A FIXED SUPPLY OF 7 UNITS OF OUTPUT TO SELL.WHAT IS THE PROFIT MAXIMIMISING PRICE AND WHAT ARE ITS MAXIMUM PROFITS

Explicit cost, Explicit cost: Explicit costs are payments made by the ...

Explicit cost: Explicit costs are payments made by the firm when it purchases or hires factors of production for the production of goods and services. They are also referred t

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