The empirical specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$ can be used to estimate
A)a short-run cubic production function.
B)short-run cubic cost function.
C)a $\text { U }$ -shaped TVC curve.
D)both b and c
E)none of the above

Question

Quizplus · Accepted Answer

The empirical specification TVC = aQ + bQ^2 + cQ^3 is used to estimate a short-run cubic cost function because it shows the relationship between total variable costs and output in the short run. It is not used to estimate a production function, as it refers to costs rather than output. Similarly, while the U-shaped TVC curve is often associated with a cubic cost function, this empirical specification alone does not determine the shape of the TVC curve. Therefore, the correct answer is B, a short-run cubic cost function.

The Empirical Specification TVC=aQ+bQ2+cQ3T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }TVC=aQ+bQ2+cQ3

The Empirical Specification $T V C = a Q + b Q ^ { 2 } + c Q ^ { 3 }$