grade. For answer(o) from others will violate ACADEMIC HONESTY policy to cause a
ID: 1107159 • Letter: G
Question
grade. For answer(o) from others will violate ACADEMIC HONESTY policy to cause a failing, each question, please show the 5 pages. Please necessary derivation (if applicable). Limit your answers within Cost Structure and Pricing: Sting Ray PoolVac, Inc. manufactures and sells a single product called the "Sting Ray," which is a patent-protected automatic cleaning, device for swimming pools. Pool Vac's Sting Ray faces its closest competitor, Howard Industries, also selling a competing pool cleaner. Using the last 26 quarters of production and cost data, PoolVac wishes to estimate its average variable costs using the following quadratic specification AVC = a + bQ + cQ". The quarterly data on average variable cost (AVC), and the quantity of Sting Rays produced and sold each quarter (Q) are presented in the data file. PoolVac also wishes to use its sales data for the last 26 quarters to estimate demand for its Sting Ray. Demand for Sting Rays is specified to be a linear function as the following in which its price (P), average income for households in the U.S. that have swimming pools (AM), and the price of the competing pool cleaner sold by Howard Industries (Pu). Questions 1. Run the appropriate regression to estimate the average variable cost function (AVC) (equation 1) for Sting Rays. Evaluate the statistical significance of the three estimated parameters using a significance level of 5 percent. Be sure to comment on the algebraic signs of the three parameter estimates. (20%) Shift End Alt Ctri InsExplanation / Answer
User commands in Stata
tsset quarter
gen Q2 = Q^2
reg AVC Q Q2
For demand function
Use the comand
tsset quarter
reg P M PH
If the p-values for the associated coefficients arteless than 55 then the coefficients are statistically significant. The results will be obtained using the above commands.
If the sign of Q is positveimplies that AVC increases with increase in Q. If the sign of Q2 is positive it implies that cost increases at an increasing rate.
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