# Bus. 640 Economics

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Chapter 3: Problem 2: Appalachian Coal Mining believes that it can increase labor productivity and, there- fore, net revenue by reducing air pollution in its mines. It estimates that the marginalcost function for reducing pollution by installing additional capital equipment is MC 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) isMR 1,000 10P How much pollution reduction should Appalachian Coal Mining undertake? MC = MR and solve for P. That is 40P = 1000-10P 40P+10P=1000 50P=1000 P=20 units. Problem 4: Twenty first Century Electronics has discovered a theft problem at its warehouse and has decided to hire…show more content…
Yes, at the 5% level, there is statistical significance Explain, using the appropriate p-value. With a 0.0128 p-value this means the exact level of significance for a T-Ratio of 2.63 is 1 % and the level of confidence is 99%. Stating b is statistically significant. d. Does advertising by its three largest rivals affect sales of Bright Side detergent in a statistically significant way? P-Value and T-Ratio show that the competitor’s advertising has a negative effect. Explain, using the appropriate p-value. The high P-value indicates that the negative T-ratio has a high probability of competitor’s advertising effecting sales of Bright Side negatively. e. What fraction of the total variation in sales of Bright Side remains unexplained? 22% What can the marketing director do to increase the explanatory power of the sales equation? He could look competitor’s prices and then Vanguard can add this to the equation as well as log variables on advertising expenses. What other explanatory variables might be added to this equation? Other variables might include family size, loads of laundry done , is there more laundry done in the summer versus the winter f. What is the expected level of sales each week when Vanguard spends \$40,000 per week and the combined advertising expenditures for the three rivals are \$100,000 per week? S = a + b(\$40,000) + c(\$100,000) S = 175086.0 + 0.85550(\$40,000) + - 0.284(\$100,000) S = 175086.0 + \$34,000 +