Question: Cost functions are often nonlinear with volume because production facilities are often able to produce larger quantities at lower rates than smaller quantities.5 Using the following data, apply simple linear regression, and examine the residual plot. What do you conclude? Construct a scatter chart and use the Excel Trendline feature to identify the best type of curvilinear trendline that maximizes R2.
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Units Produced
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Costs
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500
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S12,500
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1,000
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$25,000
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1,500
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$32,500
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2,000
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$40,000
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2,500
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$45,000
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3,000
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$50,000
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