During the last 50 years or so, main studies of cost curves have been published. The results of two of these are summarized here. In each case, interpret the equation and discuss the shapes of the total cost curve, the marginal cost curve, and the average cost curve.
a. A study of a light plant over a 6-month period resulted in the following regression equation:
Y = 16.68 + 0.125X + 0.00439X2
Where Y = Total fuel cost
X = Output
b. An early study of the steel industry indicated the following results, based on annual data for 12 years.
Y = 182,100,000 + 55.73X
where Y = Total cost
X = Weighted output, in tons
A time series analysis usually indicates a short-run cost study. Do you believe that a 12-year period is too long? Explain.