Answer to Question #24525 in Economics of Enterprise for BUSHINA

Question

As study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function:

AVC = 1.24 + .0033Q + .0000029Q2 - .000046QZ - .026Z + .00018Z2

Where AVC = average variable cost (i.e., working costs of generation), measured in pence per kilowatt-hour (kWh). (A pence was a British monetary unit equal, at that time, to 2 cents U.S.)
Q = output, measured in millions of kWh per year
Z = plant size, measured in thousands of kilowatts

a. determine the long-run variable cost function for electricity generation.
b. determine the long-run marginal cost function for electricity generation.
c. Holding plan size constant at 150,000 kilowatts, determine the short-run average