Cost function for savings and loan industry, Microeconomics

Assignment Help:

Cost Function for Savings and Loan Industry

* The empirical estimation of long run cost function can be useful in restructuring of the savings and loan industry in wake of savings and loan collapse in 1980s.

* Data for 86 savings and loans for 1975 & 1976 in six western states

- Q = total assets of each S&L

- LAC = average operating expense

- Q & TC are calculated in hundreds of millions of dollars

- Average operating cost is calculated as a percentage of total assets.

*  A quadratic long run average cost function was estimated for the year 1975:

171_cost function for saving and loan industry.png

Minimum long run average cost reaches its point of minimum average the total cost when total assets of savings and loan reach $574 million.

* Average operating expenses are 0.61% of total assets.

* Almost all savings and loans in region being studied had substantially below $574 million in assets.

* Questions

 1)  What are implications of analysis for expansion and mergers?

 2)  What are limitations of using these results?


Related Discussions:- Cost function for savings and loan industry

Consumer=m, consumer=m with the help of indifference curve analyis

consumer=m with the help of indifference curve analyis

Explain the term economic efficiency, Explain the term economic efficiency?...

Explain the term economic efficiency?  Answer:   Economic Efficiency means full utilization of all available resources in economy i.e. to produce the needed amount of goods and

#title., factor afecting the demand for durable product

factor afecting the demand for durable product

Growth of agricultural production and productivity, Growth of Agricultural ...

Growth of Agricultural Production and Productivity: Post-independence period was marked by severe and recurrent shortages of foodgrains. Dependence on imports of foodgrains wa

Compute the following price elasticities of demand, #• The price of a lapto...

#• The price of a laptop increases by 20% and there is a 40% drop in the quantity demanded. • The price of a pack of cigarettes increases by 10% and there is a 5% drop in the quan

Marginal Cost, The question states that a hotel charges $60 a night for a r...

The question states that a hotel charges $60 a night for a room per night during off peak. This hotel has a fixed cost of $75 per night and variable costs of $40 per night (only ap

Positive and normative statement, differentiate between normative and posit...

differentiate between normative and positive statements in economics with the help of a statement

Production function curve, different types of production funtion and curve ...

different types of production funtion and curve given by different economist

Consumer surplus, Consumer Surplus  -Difference between maximum amounts...

Consumer Surplus  -Difference between maximum amounts a consumer is wishing to pay for a good and amount actually paid. The stepladder demand curve is converted into a

How to calculate the cpi index, When measuring price levels in the economy ...

When measuring price levels in the economy (such as when calculating the CPI index), why is a weighted average used? Because we require giving greater emphasis to prices at whi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd