A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C = 3.12 - 0.006768Q + 0.000005359Q2 +21.1X1 (3.12) (2.61) (2.89) (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. Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes the average operating expense ratio? $1,262.92 million $1,558.81 million $631.46 million $460.99 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? 1.17% 3.15 % 1.02 % 5.63% What is the ratio with 10 branches instead? 5.93% 1.47% 3.45% 1.32%

A study of 86 savings and loan associations in six northwestern states yielded the following cost function. C = 3.12 - 0.006768Q + 0.000005359Q2 +21.1X1 (3.12) (2.61) (2.89) (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. Holding constant the effects of bank branching (X1), what is the level of total assets that minimizes the average operating expense ratio? $1,262.92 million $1,558.81 million $631.46 million $460.99 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? 1.17% 3.15 % 1.02 % 5.63% What is the ratio with 10 branches instead? 5.93% 1.47% 3.45% 1.32%

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…
1. Exercise 9.1 A study of 86 savings and loan associations in six northwestern states yielded the following cost function. 2.38 0.006153Q 0.000005359Q² 19.2X1 C + + (2.62) (2.84) (3.16) (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 = 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: t0.025,7€ 1.99 .) Check all that apply. X1 Q2 What type of average cost-output relationship is suggested by these statistical results? Quadratic Linear Cubic Based on these results, what can we conclude about the existence of economies or diseconomies of scale in savings and loan associations in…
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