1. Run the appropriate regression to estimate the average variable cost function (AVC) 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.
2. Given your answer in 1, show the estimated total variable cost, average variable cost, and marginal cost functions (TVC, AVC, and MC) for PoolVac.
3. Apply dummy variable to construct the time-series quarterly sales estimation of Sting Ray (Hint: Q = A+Bt+…). Please predict the quantity sold in the first quarter 2013.
4. Run the appropriate regression to estimate the demand function for Sting Rays. Evaluate the statistical significance of the three estimated slope parameters using a significance level of 5 percent. Discuss the appropriateness of the algebraic signs of each of the three slope parameter estimates.
5. The manager at PoolVac, Inc. believes Howard Industries is going to price its automatic pool cleaner at $250, and average household income in the U.S. is expected to be $65,000. Using the regression results from
Question 4, write the estimated demand function (with only P as the independent variable), inverse demand function, and marginal revenue (MR) function.
6. Given your MC function in question 2 and MR function in question 5, what is the profit-maximizing unit price PoolVac should charge for Sting Ray? (10%)