Cost function for savings and loan industry, Microeconomics

Assignment Help:

Cost Function for Savings and Loan Industry

* The empirical estimation of long run cost function can be useful in restructuring of the savings and loan industry in wake of savings and loan collapse in 1980s.

* Data for 86 savings and loans for 1975 & 1976 in six western states

- Q = total assets of each S&L

- LAC = average operating expense

- Q & TC are calculated in hundreds of millions of dollars

- Average operating cost is calculated as a percentage of total assets.

*  A quadratic long run average cost function was estimated for the year 1975:

171_cost function for saving and loan industry.png

Minimum long run average cost reaches its point of minimum average the total cost when total assets of savings and loan reach $574 million.

* Average operating expenses are 0.61% of total assets.

* Almost all savings and loans in region being studied had substantially below $574 million in assets.

* Questions

 1)  What are implications of analysis for expansion and mergers?

 2)  What are limitations of using these results?


Related Discussions:- Cost function for savings and loan industry

Derivation of ordinary demand function, Derivation Of Ordinary Demand Funct...

Derivation Of Ordinary Demand Function: Suppose,   and q 1  = (Q 1 1 , Q 2 1 ,..., Q n 1 )T. Let M0 be the money income and p 0 q 0  = M 0  and p 0 q 0 ≥ p 0 q 1 , where p

Market supply labour, use a graphical illustration to describe briefly what...

use a graphical illustration to describe briefly what the influence of each of the following be on the market supply of labour,(a) an increase in immigrants, (b) a reduction in wag

Demand for the big mac on the rise, illustrate and explain the changing dem...

illustrate and explain the changing demand for big mac using the indifference curve and budget line

Supply, plese give me supply assigement

plese give me supply assigement

What is the gross domestic product of norway, Normal 0 false ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Macroeconomics, A government is currently operating with an annual budget d...

A government is currently operating with an annual budget deficit of $40 billion. The government has determined that: • Every $10 billion reduction in the amount of bonds it issue

Disadvantages of state trading, Disadvantages of State Trading State tra...

Disadvantages of State Trading State trading has several disadvantages. (i) State trading is often afflicted by the corruption and inefficiency usually associated with the pu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd