Q 0 1 2 3 4 5 6 7 8 9 10 11 TC $48 73 94 114 130 148 168 189 216 246 278 320 FC 1 VC AFC n/a AVC n/a 12 369 FC= fixed cost; AFC= average fixed cost; VC= variable cost; AVC=average variable cost; TC= total cost; ATC=average total cost; MC-marginal cost; Q represents the quantity of output ATC n/a MC n/a

Q 0 1 2 3 4 5 6 7 8 9 10 11 TC $48 73 94 114 130 148 168 189 216 246 278 320 FC 1 VC AFC n/a AVC n/a 12 369 FC= fixed cost; AFC= average fixed cost; VC= variable cost; AVC=average variable cost; TC= total cost; ATC=average total cost; MC-marginal cost; Q represents the quantity of output ATC n/a MC n/a

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

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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 $461.31 million What is the average operating expense ratio for a savings and loan association with the level of total assets determined in the previous part and 1 branch?…
A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C� = 2.38 - 0.006153Q� + 0.000005359Q2�2 + 19.2X1�1 (2.86) (3.08) (3.68) (2.96) where C� = average operating expense ratio, expressed as a percentage and defined as total operating expense ($ 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. Which of the variable(s) is (are) statistically significant in explaining variations in the average operating expense ratio? (Hint: t0.025,70=1.99�0.025,70=1.99.) Check all that apply. Q� Q2�2 X1�1 What type of average cost-output relationship is suggested by these statistical results? Quadratic Cubic Linear Based on these results, what can we…
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