Drivers employed Total Cargo Transported (tons) 1 2 3 4 5 6 7 8 5 12 21 32 40 46
ID: 1188527 • Letter: D
Question
Drivers employed
Total Cargo Transported (tons)
1
2
3
4
5
6
7
8
5
12
21
32
40
46
51
50
a. Which inputs are fixed and which are variable in the production function of Jennifer Trucking Company? Over what ranges do there appear to be increasing, constant and/or diminishing returns to the number of drivers employed?
b. What number of drivers appears to be most efficient in terms of output per driver?
c. What number of drivers appears to minimize the marginal cost of transportation assuming that all drivers are paid the same salary?
Sales = Output
TVC ($)
102,813
176,163
196,121
222,885
226,356
296,416
378,446
450,666
579,696
607,082
624,680
636,133
201,953
340,608
377,940
432,863
441,714
629,267
867,596
1,103,807
1,701,125
1,917,861
2,195,352
2,479,195
a. Using regression analysis, find an equation that best fits the data to represent the TVC function.
b. At what sales/output level will marginal costs (MC) reach a minimum?
c. Estimate the value of TVC for sales/output level 250,000 units, and calculate the 95% confidence interval for your estimate.
Drivers employed
Total Cargo Transported (tons)
1
2
3
4
5
6
7
8
5
12
21
32
40
46
51
50
Explanation / Answer
PART 1
a) Since Drivers salary is fixed irrespective of number of trips hence this is fixed cost and number of drivers employed is variable as these can be avoided if transporation of cargo is restricted.
Upto 4 drivers returns are increasing, on 5th driver constant and after that returns are decreasing.
b)5 drivers appears to be most efficient in terms of output per driver.
c)Beyond 5 drivers it appears to minimize the marginal cost of transportation assuming that all drivers are paid the same salary.
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