Aditya Joshi ECON 490 HW 7
2. The economic interpretation of suppressing the constant term is that there is no cost at Q = 0. This
means that there are no fixed costs for this producer. This also means that this model must be in the
long run.
TC = .684Q – .0003162Q2 + 2.37*10-7Q3
AC = TC / Q = .684 – .0003162Q + 2.37*10-7Q2
MC = dTC/dQ = 684 – 0.0006324Q + 7.11*10-7Q2
The graph I got looked like a textbook depiction of average and marginal costs. The Marginal Cost curve
intersects the Average Cost curve right between the two lowest points in the data. My a, b and c
coefficients all conformed to expectations.
3. a. H0: βK = βL = βE = 0
HA: βK ≠ 0 or βL ≠ 0 or βE ≠ 0 or βK ≠ βE or βK ≠ βL or βL ≠ βE
F statistic : ((Unrestricted – Restricted)/3)/((Unrestricted)/(39 – 3 – 1)) =
c)
H0: βK + βL + βE = 1
HA: βK + βL + βE ≠ 1
βE = 1 – βK – βL
y = βKlog(invest) + βLlog(pay) + βElog(energy) + βyyear
y = βKlog(invest) + βLlog(pay) + (1 – βK – βL)log(energy) + βyyear
y = βKlog(invest) + βLlog(pay) + log(energy) – βKlog(energy) – βLlog(energy) + βyyear
y = βK(log(invest) – log(energy)) + βL(log(pay) – log(energy)) + log(energy) + βyyear
y – log(energy)= βK(log(invest) – log(energy)) + βL(log(pay) – log(energy)) + βyyear