Manicurists and pedicurists are required to be licensed in both California and Florida. California, people practicing these occupations must tale 600 hours of classroom training; in Florida, they must take only 240 hours of classroom training. Ceteris paribus (that is, holding other factors constant), in which state would you expect pedicures and manicures to be more expensive? Explain. How could you use per capita consumption of pedicures and manicures in the two states to help you decide whether the classroom training requirement was chiefly designed to improve the quality of pedicures and manicures or to keep the competition out? Concept Introduction: Competition in a market is a way in which the existing firm in the market tries to have dominance in the market with larger market share. The way of dominance depends on the quality, restrictive laws and the price of good provided to the consumers.

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Chapter 19, Problem 4DQ

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Manicurists and pedicurists are required to be licensed in both California and Florida. California, people practicing these occupations must tale 600 hours of classroom training; in Florida, they must take only 240 hours of classroom training. Ceteris paribus (that is, holding other factors constant), in which state would you expect pedicures and manicures to be more expensive? Explain. How could you use per capita consumption of pedicures and manicures in the two states to help you decide whether the classroom training requirement was chiefly designed to improve the quality of pedicures and manicures or to keep the competition out?

Concept Introduction:

Competition in a market is a way in which the existing firm in the market tries to have dominance in the market with larger market share. The way of dominance depends on the quality, restrictive laws and the price of good provided to the consumers.

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CEO Salary and Firm SalesWe can estimate a constant elasticity model relating CEO salary to firm sales. The data set is the same one used in Example 2.3, except we now relate salary to sales. Let sales be annual firm sales, measured in millions of dollars. A constant elasticity model is[2.45]ßßlog (salary) = ß0 + ß0log (sales) + u,where ß1 is the elasticity of salary with respect to sales. This model falls under the simple regression model by defining the dependent variable to be y = log(salary) and the independent variable to be x = log1sales2. Estimating this equation by OLS gives[2.46]log (salary)^=4.822 + 0.257 (sales) n = 209, R2 = 0.211.The coefficient of log(sales) is the estimated elasticity of salary with respect to sales. It implies that a 1% increase in firm sales increases CEO salary by about 0.257%—the usual interpretation of an elasticity.

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