Exam (elaborations)
Midterm 2020 Questions + Answer Key
- Course
- Comm295 (COMM295)
- Institution
- University Of British Columbia (UBC )
Midterm 2020 Questions + Answer Key
[Show more]
Seller
Follow
Content preview
COMM 295 Midterm 2020Numerical FIB and Essay Questions
Q 25
Your firm’s cost function for producing plexiglass is given by C(q) = 15 + 2q + 0.5q2. You are
currently producing q = 5 units, and you receive a request to produce and sell one additional
unit. The difference between your marginal cost of producing one more unit and your average
variable cost of producing 6 units is _____. (Input a number, such as "56", with no dollar sign or
quotation marks.)
MC = dC/dq = 2+q
At q = 5, MC = 7
AVC (q = 6) = 2 +0.5q = 5
The difference = 2
Q 26
Refer to the previous question regarding the plexiglass cost function. Your boss believes that
when averaged over a large number of firms the supply function (as measured by marginal cost)
is flat. In other words, your boss believes there is no statistical evidence that the marginal cost
of producing plexiglass increases with higher levels of production. Suppose you have cost data
from a large number of firms which produce plexiglass, and you use regression to estimate the
quadratic cost function C = a + bQ + cQ2 + e. You obtain estimates for the “a”, “b” and “c”
coefficients and the standard errors for those three estimates. Identify the steps you would take
to test your boss’ beliefs about the plexiglass supply function.
Your answer should take the form:
Step One: Estimate the regression equation and collect coefficient estimates and standard
errors.
Step Two:
Step Three:
Etc.
MC = b+2cQ
1: Run regression to find the values of a, b and c and their corresponding standard errors.
2. If MC increases with Q, then c > 0.
3. For c to be significant t-stat for c = c/standard error of c > 2. The null H is c = 0. If t-stat > 2,
we reject the null H, which indicates that c > 0 or that MC increases with Q. If t < 2, then we
cannot reject c = 0. That means MC is constant = b.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller smuxe. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for CA$4.16. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
76449 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now