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1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 2.38 (3.33) 0.006153Q (3.08) 0.000005359Q² (3.16) 19.2X₁ (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 = 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: £0.025,70 = 1.99.) Check all that apply. Q2 What type of average cost-output relationship is suggested by these statistical results? ○ Cubic Linear Quadratic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in the Northwest? ○ Economies of scale at all output levels Diseconomies of scale at all output levels Economies of scale at lower output levels and diseconomies of scale at higher output levels O Diseconomies of scale at lower output levels and economies of scale at higher output levels

1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 2.38 (3.33) 0.006153Q (3.08) 0.000005359Q² (3.16) 19.2X₁ (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 = 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: £0.025,70 = 1.99.) Check all that apply. Q2 What type of average cost-output relationship is suggested by these statistical results? ○ Cubic Linear Quadratic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in the Northwest? ○ Economies of scale at all output levels Diseconomies of scale at all output levels Economies of scale at lower output levels and diseconomies of scale at higher output levels O Diseconomies of scale at lower output levels and economies of scale at higher output levels

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 2.38 (3.33) 0.006153Q (3.08) 0.000005359Q² (3.16) 19.2X₁ (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 = 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: £0.025,70 = 1.99.) Check all that apply. Q2 What type of average cost-output relationship is suggested by these statistical results? ○ Cubic Linear Quadratic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in the Northwest? ○ Economies of scale at all output levels Diseconomies of scale at all output levels Economies of scale at lower output levels and diseconomies of scale at higher output levels O Diseconomies of scale at lower output levels and economies of scale at higher output levels
Transcribed Image Text:1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C 2.38 (3.33) 0.006153Q (3.08) 0.000005359Q² (3.16) 19.2X₁ (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 = 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: £0.025,70 = 1.99.) Check all that apply. Q2 What type of average cost-output relationship is suggested by these statistical results? ○ Cubic Linear Quadratic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in the Northwest? ○ Economies of scale at all output levels Diseconomies of scale at all output levels Economies of scale at lower output levels and diseconomies of scale at higher output levels O Diseconomies of scale at lower output levels and economies of scale at higher output levels
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