Use the Excel file on Blackboard named "FinalCostData", The data are defined as follows: a number to identify each company in the sample year: self...

Use the Excel file on Blackboard named "FinalCostData", The data are defined as follows:

id: a number to identify each company in the sample

year: self explanatory I hope

cost: in thousands of dollars

q: output (in number of customers served per day)

The data are gathered from greasy spoon restaurants in 1970 in PA. Data are fictional.

a) Estimate a linear, quadratic, and cubic cost function (3 separate regressions).

Give Gretl output and write out each estimated cost function. (5 points)

b) Which model (linear, quadratic, or cubic) works best for this data. Explain your answer.

         (hint: look at statistical significance of coefficients in each regression)

(5 points)

c) Using the model from b) you have identified as best, calculate the following:

i) Fixed cost (3 points)

ii) Average total cost (3 points)

iii) Marginal cost (4 points)

d) Using your answers from part c) calculate fixed cost, average total cost, and marginal cost if 25 units

are produced. Show all work. (5 points)

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