When estimating a short-run average variable cost function,
A)the intercept must be forced to equal zero.
B)the cost data must be inflation-adjusted.
C)at least one input must have been constant during the period in which the data were collected.
D)both b and c
E)all of the above

Question

Quizplus · Accepted Answer

In estimating a short-run average variable cost function, it's important to adjust cost data for inflation to ensure that the costs are comparable over time (choice B). Additionally, in the short run, at least one input is fixed (choice C), meaning that its quantity does not change with the level of output. Forcing the intercept to equal zero (choice A) is not a requirement for estimating such a function. Therefore, both B and C are correct.

When Estimating a Short-Run Average Variable Cost Function