Make sure you show ALL your work and explain where asked. Groups who do not provide explanations or simply provide final answers will not receive credit for that question. See the assignment handout for more information.

Groups should answer the following questions:

(13 points) The following table shows the number of calculators that can be assembled per week by various numbers of workers.

Quantity of Number of Calculators Average Marginal Labor Per Week Product Product 0 0 — — 1 60 2 160 100 3 80 4 280 5 60

a. (5) Fill in the missing numbers in the table. Show all your calculations.
b. (8) Identify the level of output above where the firm is in Stage II of production. Why will the rational producer never operate in Stages I or III? Explain your answers well.

2. (39 points) Using linear regression and 24 months of data, a firm estimated its demand function for its Good A and achieved the following results:

QA = 445 – 6.5PA + 0.75PB + 1.85Y
(1.4) (0.35) (0.95) (standard errors)
_
R2 = 0.81 R2 = 0.782 F = 28.42 SEE = 5.25

where QA = quantity sold per month of good A, in units
PA = price of good A, in US$
PB = price of good B, in US$
Y = average income, in thousands US$

a. (5) Interpret the estimated coefficients of PA, Y and PB. In other words, how much a one unit change in each variable influence sales of Good A? Be specific (use numbers).
b. (5) Evaluate the overall explanatory power of the regression model. Use a 0.05 level of significance. State all your hypotheses and explain your results. Do not use rules of thumb.
c. (10) Which of the independent variables, if any, appear to be statistically significant at the 0.05 level in explaining sales? State all your hypotheses and explain your results. Do not use rules of thumb.
d. (8) At present, the price of Good A is $40, the…