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

Principle of economic, You have decided to sell some goods at a local music...

You have decided to sell some goods at a local music festival. You have hired a sales stand for $500. Your cost per item is $3 and you will sell each item for $5. When you did your

Labor Economics, What is Nancy’s lifetime income as a function of her level...

What is Nancy’s lifetime income as a function of her level of schooling, S? 2. What is Nancy’s lifetime income if she gets no schooling? What is it if she goes to school for all 60

Mixed economy, is south african economic system more allocative efficient?

is south african economic system more allocative efficient?

Foreign investment, Foreign investment: To attract foreign investment ...

Foreign investment: To attract foreign investment – Developing Plans are used as a means of attracting foreign investment or foreign aid.Foreign government and international o

Home work, #question. what is the underlying reason for the law of increas...

#question. what is the underlying reason for the law of increasing opportunity cost?

Point elasticity of demand, Point Elasticity of Demand - For large pric...

Point Elasticity of Demand - For large price changes (such as 20%), value of elasticity will depend upon where price and quantity lies on demand curve. - Point elasticity me

Explain the kuhn-tucker theorem in economics, Explain the Kuhn-Tucker Theor...

Explain the Kuhn-Tucker Theorem in economics. Kuhn-Tucker Theorem: Assume that x solves the inequality constrained optimization problem and also satisfies the constrained qu

Should the Government Provide National Health Insurance, What is meant by t...

What is meant by the multifaceted nature of the U.S. health care system? How is health care financed in the U.S.? What is the advantage and disadvantage of the U.S. multi-payer sys

Consumer equullibruim, income=100 price of x=5 price of x2=10 find consumer...

income=100 price of x=5 price of x2=10 find consumer equilibrium with diagram

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