Observe that the monthly power fixed cost is about

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Unformatted text preview: tions expenses vs. hours. Notice that operation expenses are for commercial and intercompany hours and therefore the “quantity” on the x-axis will be . Here is the scatter plot – notice that that data points more or less are on a straight line so that the “best fitting” line is linear: 38 ECO 204 Chapter 13: The Short Run Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. The operations cost function is: ⏟( ⏟ ) We have managed to derive the functional form of the cost function and derive its parameters (had to say that one more time). Observe that the monthly operations fixed cost (the salaries) is about $21,600 and that each additional hour of commercial and intercompany costs $24/hour in variable expenses. In particular, notice that Putting all these together, we get: ( ) ( ) Combing all other fixed expenses to power and operations fixed expenses gives. ⏟ ⏟ ⏟ ⏟ ⏟ As such: ( { ( ) } ) 39 ECO 204 Chapter 13: The Short Run Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not...
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This note was uploaded on 03/20/2014 for the course ECON 204 taught by Professor Ajazhussain during the Fall '09 term at University of Toronto- Toronto.

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