10. You operate an inland water transport service and hypothesize that your average costs per cargo...

 

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10. You operate an inland water transport service and hypothesize that your average costs per cargo ton-mile of operation (AVCOST) depend upon the average length of haul (AVH) and route density (DEN). You estimate the following equation using a cross-section of 38 observations of water transport firms: AVCOST = 0,04 -0,15 AVH-0,80 DEN, (0,01) (0,042) (0,235) R = 0,85, where AVCOST = average costs = total costs divided by cargo ton-miles; AVH = average length of haul = cargo ton-miles divided by tons carried; and DEN = route density = cargo ton-miles divided by route mileage. Numbers in parenthesis are standard errors. a. How well do the two explanatory variables explain average costs? b. Interpret coefficients. c. Calculate a 99% confidence region for the true marginal effect of density on average cost. d. Assuming that the average cost per ton-mile is 18 cents and average length of haul is 300 miles, what is the elasticity of average cost with respect to average length of haul? 10. You operate an inland water transport service and hypothesize that your average costs per cargo ton-mile of operation (AVCOST) depend upon the average length of haul (AVH) and route density (DEN). You estimate the following equation using a cross-section of 38 observations of water transport firms: AVCOST = 0,04 -0,15 AVH-0,80 DEN, (0,01) (0,042) (0,235) R = 0,85, where AVCOST = average costs = total costs divided by cargo ton-miles; AVH = average length of haul = cargo ton-miles divided by tons carried; and DEN = route density = cargo ton-miles divided by route mileage. Numbers in parenthesis are standard errors. a. How well do the two explanatory variables explain average costs? b. Interpret coefficients. c. Calculate a 99% confidence region for the true marginal effect of density on average cost. d. Assuming that the average cost per ton-mile is 18 cents and average length of haul is 300 miles, what is the elasticity of average cost with respect to average length of haul?

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Answer a here R085 it means 85 of variability explained by this model with two explanatory ... View the full answer