� = 3.69 - 0.007999Q� + 0.000005359Q2�2 + 25.0X1�1 (3.69) (3.08) (3.42) (3.50) where C� = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent. Q� = output; measured by total assets ($ million) X1�1 = ratio of the number of branches to total assets ($ million) Note: The number in parentheses below each coefficient is its respective t-statistic. Holding constant the effects of bank branching (X1�1), what is the level of total assets that minimizes the average operating expense ratio?
� = 3.69 - 0.007999Q� + 0.000005359Q2�2 + 25.0X1�1 (3.69) (3.08) (3.42) (3.50) where C� = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent. Q� = output; measured by total assets ($ million) X1�1 = ratio of the number of branches to total assets ($ million) Note: The number in parentheses below each coefficient is its respective t-statistic. Holding constant the effects of bank branching (X1�1), what is the level of total assets that minimizes the average operating expense ratio?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter9: Applications Of Cost Theory
Section: Chapter Questions
Problem 1E
Related questions
Question
A study of 86 savings and loan associations in six northwestern states yielded the following cost function.
| C� | = | 3.69 | - | 0.007999Q� | + | 0.000005359Q2�2 | + | 25.0X1�1 |
| (3.69) | (3.08) | (3.42) | (3.50) | |||||
where C� = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ million) divided by total assets ($ million) times 100 percent.
Q� = output; measured by total assets ($ million)
X1�1 = ratio of the number of branches to total assets ($ million)
Note: The number in parentheses below each coefficient is its respective t-statistic.
Holding constant the effects of bank branching (X1�1), what is the level of total assets that minimizes the average operating expense ratio?
$746.31 million
$1,562.70 million
$1,492.63 million
$461.31 million
What is the average operating expense ratio for a savings and loan association with the level of total assets determined in the previous part and 1 branch?
0.74%
1.17%
4.31%
3.72%
What is the ratio with 10 branches instead?
1.04%
4.61%
4.03%
1.48%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
