The monthly data on unit costs and production levels in the file intel.xls are associated with production of Intel's 27256 EPROM (a memory chip) in the mid 1980's. The third series Labor was obtained externally from a consultant to the semiconductor industry. Variable names are
AVC = unit variable costs of production
Q = monthly production levels
Labor = an index of labor and material costs in related industries.
Use these data to estimate Intel's average variable production cost function. Consider the impact of scale economies, learning economies and of labor and material costs on production costs. Several additional facts may be of use: i) In May 1983, there was a one month disruption as production was moved off-shore to the Philippines; ii) In September 1983, there was an unspecified production "problem" which may have impacted costs; iii) The consultant, mentioned above, claims that there may be a seasonal component which impacts production in the months of June and December about equally.
a. Estimate the average variable cost function for the 27256 EPROM..