Study of several grocery stores in the midwest yielded

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A study of several grocery stores in the midwest yielded the following cost function:

C(q) = 5.3 + 0.05 q - 2.3 M

(1.4) (2.9) (2.2)

Where q is the output of the store, measured in thousands of dollars of sales, and M is 1 if there is a regional warehouse located within 100 miles and 0 otherwise. The numbers below each coefficient are the t-values.

a. Which variables are statistically significant in explaining variations in the costs?

b. What type of cost-output relationship is suggested by these statistical results?

c. Based on these results, what can you say about the economies or diseconomies of scale in the Midwest?

Reference no: EM131103848

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