1. Exercise 9.1A study of 86 savings and loan associations in six northwestern states yielded the following costfunction.2.380.006153Q0.000005359Q²19.2X1C++(2.62)(2.84)(3.16)(3.50)where C = average operating expense ratio, expressed as a percentage and defined as totaloperating 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 averageoperating expense ratio? (Hint: t0.025,7€ 1.99.) Check all that apply.X1Q2What type of average cost-output relationship is suggested by these statistical results?QuadraticLinearCubicBased on these results, what can we conclude about the existence of economies or diseconomiesof scale in savings and loan associations in the Northwest?Diseconomies of scale at all output levelsEconomies of scale at all output levelsDiseconomies of scale at lower output levels and economies of scale at higher outputlevelsEconomies of scale at lower output levels and diseconomies of scale at higher outputlevels

Ans. To evaluate the variables that are statistically significant in explaining the variations is…

Answered: A study of 86 savings and loan…

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A study of 86 savings and loan associations in six northwestern states yielded the following cost function.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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