: Managerial Economics Essay

Words: 1315
Pages: 6

Appalachian Coal Mining believes that it can increase labor productivity and, there- fore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction the marginal increase in revenue (MR) is MR =1,000 =10P. How much pollution reduction should Appalachian Coal Mining undertake?
The installation of additional capital equipment will reduce pollution and increase the labor productivity..But look at the additional cost...It is not offsetting the benefit
So fix the level of pollution reduction in an
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Yes, at the 5% level, there is statistical significance at the 5% level.
Explain, using appropriatep-value…
A 0.0128 p-value means the exact level of significance for a T-Ratio of 2.63 is 1 % and the level of confidence is 99%. Stating b is statistically significant.

d)Does the advertising by its three largest rivals affect sales of Bright Side detergent in a statistical significant way?
P-Value and T-Ratio show that the competitor’s advertising has a negative effect.
Explain using the appropriate p-value…
The high P-value indicates that the negative T-ratio has a high probability of competitor’s advertising effecting sales of Bright Side negatively.

e)What fraction of the total variation in sales of Bright Side remains unexplained?
What can the marketing director do to increase the explanatory power of the sales equation?
He could look at the prices charged by the competitor and Vanguard and add this to the equation as well as log variables on advertising expenses.
What other explanatory variables might be added to this equation?