Use the regression results below to answer the following two questions R Square:

Question

Use the regression results below to answer the following two questions R Square: 0.9994 Adjusted R Square: 0.9991 Blank Coefficients Standard Error t Stat P-value Intercept 0 N/A N/A N/A 25.282 1.658 14.103 0.000 17.096 0.000 15.250 0.141 60.082 4.260 -4.749 0.278 Using these results, calculate the Q, AP, and MP for L8 workers Select one O a. Q-1, 984. AP 205.4: MP 62.1 b. Q-1783. AP-197.3, MP-79.3 O C. Q 1,616; AP-202.0; MP 74.7 O d, Q 1, 557; AP-213.9 MP 80.8 At 8 workers, is SMC rising or falling, and how do you know? Select one O a. At 8 workers, SMC is rising since MP is falling O b. At 8 workers, SMC is rising since MP is rising O C. At 8 workers, SMC is falling since MP is rising O d. At 8 workers, SMC is falling since MP is falling

Explanation / Answer

Estimated regression equation: Q = 25.282L + 60.082L2 - 4.749L3

(1) (c)

When L = 8,

Q = (25.282 x 8) + (60.082 x 8 x 8) - (4.749 x 8 x 8 x 8) = 202.26 + 3,845.25 - 2,431.49 = 1,616

AP = 1,616 / 8 = 202

MP = dQ / dL = 25.282 + 120.164L - 14.247L2 = 25.282 + (120.164 x 8) - (14.247 x 8 x 8)

= 25.282 + 961.312 - 911.808 = 74.7

(2) (a)

Let us compute MP when L = 7:

MP = 25.282 + (120.164 x 7) - (14.247 x 7 x 7) = 25.282 + 841.169 - 698.103 = 168.35

Therefore, as L increases from 7 to 8 units, MP decreases from 168.35 to 74.7 units, revealing diminishing returns to L. This signifies that SMC is rising.

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