ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Twentyfirst Century Electronics has discovered a theft problem at its warehouse and has decided to hire security guards. The firm wants to hire the optimal number of security  guards. The following table shows how the number of security guards affects the number of radios stolen per week.

Number of

security guards

 

Number of radios

stolen per week

0

50

1

30

2

20

3

14

4

8

5

6

 

a- If each security guard is paid $200 a week and the cost of a stolen radio is $25, how
many security guards should the firm hire?
b. If the cost of a stolen radio is $25, what is the most the firm would be willing to pay
to hire the first security guard?
c. If each security guard is paid $200 a week and the cost of a stolen radio is $50, how
many security guards should the firm hire

 

ther
4. Twentyfirst Century Electronics has discovered a theft problem at its warehouse and
has decided to hire security guards. The firm wants to hire the optimal number of secu-
rity guards. The following table shows how the number of security guards affects the
number of radios stolen per week.
Number of
security guards
1
2
Number of radios
stolen per week
50
30
20
14
6
a. If each security guard is paid $200 a week and the cost of a stolen radio is $25, how
many security guards should the firm hire?
b. If the cost of a stolen radio is $25, what is the most the firm would be willing to pay
to hire the first security guard?
c. If each security guard is paid $200 a week and the cost of a stolen radio is $50, how
many security guards should the firm hire?
5. U.S. Supreme Court Justice Stephen Breyer's book Breaking the Vicious Circle: Toward
expand button
Transcribed Image Text:ther 4. Twentyfirst Century Electronics has discovered a theft problem at its warehouse and has decided to hire security guards. The firm wants to hire the optimal number of secu- rity guards. The following table shows how the number of security guards affects the number of radios stolen per week. Number of security guards 1 2 Number of radios stolen per week 50 30 20 14 6 a. If each security guard is paid $200 a week and the cost of a stolen radio is $25, how many security guards should the firm hire? b. If the cost of a stolen radio is $25, what is the most the firm would be willing to pay to hire the first security guard? c. If each security guard is paid $200 a week and the cost of a stolen radio is $50, how many security guards should the firm hire? 5. U.S. Supreme Court Justice Stephen Breyer's book Breaking the Vicious Circle: Toward
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Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

Why is the calculation of the total cost is wrong. The below is the right numbers but it is different from the solution given and if it comes down to this, will it be 2 or 3 security guards to employ to minimize the loss?

50*25 = 1250

30*25 = 750 

20*25 = 500 

14*25 = 350 

Please provide clarification and provide the correct solutiob

Solution
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Follow-up Question

4- The manager of Collins Import Autos believes the number of cars sold in a day(Q) depends on two factors: (1) the number of hours the dealership is open (H) and (2) the number of salespersons working that day (S ). After collecting data for two months (53 days), the manager estimates the following log-linear model:

Q = aHbSc

-----

a. Explain how to transform this log-linear model into a linear form that can be estimated using multiple regression analysis.

b. How do you interpret coefficients b and c? If the dealership increases the number of salespersons by 20 percent, what will be the percentage increase in daily sales?

c. Test the overall model for statistical significance at the 5 percent significance level.

 

The computer output for the multiple regression analysis is shown below:
DEPENDENT VARIABLE: LNQ
OBSERVATIONS: 53
VARIABLE
INTERCEPT
LNH
LNS
PARAMETER
ESTIMATE
0.9162
0.3517
0.2550
R-SQUARE
0.5452
STANDARD
ERROR
0.2413
0.1021
0.0785
F-RATIO P-VALUE ON F
29.97
0.0001
T-RATIO
3.80
3.44
3.25
P-VALUE
0.0004
0.0012
0.0021
b. How do you interpret coefficients b and c? If the dealership increases the number of
salespersons by 20 percent, what will be the percentage increase in daily sales?
c. Test the overall model for statistical significance at the 5 percent significance level.
d. What percent of the total variation in daily auto sales is explained by this equation?
What could you suggest to increase this percentage?
e. Test the intercept for statistical significance at the 5 percent level of significance. If H
and S both equal 0, are sales expected to be 0? Explain why or why not.
f. Test the estimated coefficient b for statistical significance. If the dealership decreases
its hours of operation by 10 percent, what is the expected impact on daily sales?
expand button
Transcribed Image Text:The computer output for the multiple regression analysis is shown below: DEPENDENT VARIABLE: LNQ OBSERVATIONS: 53 VARIABLE INTERCEPT LNH LNS PARAMETER ESTIMATE 0.9162 0.3517 0.2550 R-SQUARE 0.5452 STANDARD ERROR 0.2413 0.1021 0.0785 F-RATIO P-VALUE ON F 29.97 0.0001 T-RATIO 3.80 3.44 3.25 P-VALUE 0.0004 0.0012 0.0021 b. How do you interpret coefficients b and c? If the dealership increases the number of salespersons by 20 percent, what will be the percentage increase in daily sales? c. Test the overall model for statistical significance at the 5 percent significance level. d. What percent of the total variation in daily auto sales is explained by this equation? What could you suggest to increase this percentage? e. Test the intercept for statistical significance at the 5 percent level of significance. If H and S both equal 0, are sales expected to be 0? Explain why or why not. f. Test the estimated coefficient b for statistical significance. If the dealership decreases its hours of operation by 10 percent, what is the expected impact on daily sales?
Solution
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Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question

Why is the calculation of the total cost is wrong. The below is the right numbers but it is different from the solution given and if it comes down to this, will it be 2 or 3 security guards to employ to minimize the loss?

50*25 = 1250

30*25 = 750 

20*25 = 500 

14*25 = 350 

Please provide clarification and provide the correct solutiob

Solution
Bartleby Expert
by Bartleby Expert
SEE SOLUTION
Follow-up Question

4- The manager of Collins Import Autos believes the number of cars sold in a day(Q) depends on two factors: (1) the number of hours the dealership is open (H) and (2) the number of salespersons working that day (S ). After collecting data for two months (53 days), the manager estimates the following log-linear model:

Q = aHbSc

-----

a. Explain how to transform this log-linear model into a linear form that can be estimated using multiple regression analysis.

b. How do you interpret coefficients b and c? If the dealership increases the number of salespersons by 20 percent, what will be the percentage increase in daily sales?

c. Test the overall model for statistical significance at the 5 percent significance level.

 

The computer output for the multiple regression analysis is shown below:
DEPENDENT VARIABLE: LNQ
OBSERVATIONS: 53
VARIABLE
INTERCEPT
LNH
LNS
PARAMETER
ESTIMATE
0.9162
0.3517
0.2550
R-SQUARE
0.5452
STANDARD
ERROR
0.2413
0.1021
0.0785
F-RATIO P-VALUE ON F
29.97
0.0001
T-RATIO
3.80
3.44
3.25
P-VALUE
0.0004
0.0012
0.0021
b. How do you interpret coefficients b and c? If the dealership increases the number of
salespersons by 20 percent, what will be the percentage increase in daily sales?
c. Test the overall model for statistical significance at the 5 percent significance level.
d. What percent of the total variation in daily auto sales is explained by this equation?
What could you suggest to increase this percentage?
e. Test the intercept for statistical significance at the 5 percent level of significance. If H
and S both equal 0, are sales expected to be 0? Explain why or why not.
f. Test the estimated coefficient b for statistical significance. If the dealership decreases
its hours of operation by 10 percent, what is the expected impact on daily sales?
expand button
Transcribed Image Text:The computer output for the multiple regression analysis is shown below: DEPENDENT VARIABLE: LNQ OBSERVATIONS: 53 VARIABLE INTERCEPT LNH LNS PARAMETER ESTIMATE 0.9162 0.3517 0.2550 R-SQUARE 0.5452 STANDARD ERROR 0.2413 0.1021 0.0785 F-RATIO P-VALUE ON F 29.97 0.0001 T-RATIO 3.80 3.44 3.25 P-VALUE 0.0004 0.0012 0.0021 b. How do you interpret coefficients b and c? If the dealership increases the number of salespersons by 20 percent, what will be the percentage increase in daily sales? c. Test the overall model for statistical significance at the 5 percent significance level. d. What percent of the total variation in daily auto sales is explained by this equation? What could you suggest to increase this percentage? e. Test the intercept for statistical significance at the 5 percent level of significance. If H and S both equal 0, are sales expected to be 0? Explain why or why not. f. Test the estimated coefficient b for statistical significance. If the dealership decreases its hours of operation by 10 percent, what is the expected impact on daily sales?
Solution
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