Refer to the Following:
a Consulting Firm Estimates the Following $Q _ { t } = a + b t + c D$

question 50

Multiple Choice

Refer to the following:
A consulting firm estimates the following quarterly sales forecasting model:
$Q _ { t } = a + b t + c D$
The equation is estimated using quarterly data from 2003I-2013III (t = 1,..., 43) . The variable D is a dummy variable for the second quarter where:
D = 1 in the second quarter, and 0 otherwise.
The results of the estimation are:
$\begin{array}{rllll}\text { DEPENDENT VARIABLE: } & \text { QT } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ONF } \\\text { OBSERVATIONS: } & 43 & 0.8644 & 127.5 & 0.0001\\\\\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & \\&\text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \\\text { INTERCEPT } & 22.5 & 9.32 & 2.41 & 0.0201 \\\text { T } & 1.86 & 0.55 & 3.38 & 0.0016 \\\text { D } & 2.0 & 0.71 & 2.82 & 0.0075\end{array}$
-Using the estimated trend line, what is the predicted level of sales in 2013IV ?

• A) 110.06
• B) 106.20
• C) 104.34
• D) 102.2
• E) none of the above

---

Definitions:

Long-Run Cost Function

A graphical or mathematical representation that shows the lowest cost at which a firm can produce any given level of output in the long run, when all inputs are variable.

Positive Output

A situation where the production of goods or services is above zero.

Production Function

An equation or system that illustrates the connection between production inputs and the resulting products or services.

Long-Run Total Cost

Refers to the total cost incurred by a firm in producing a given output when all inputs, including both fixed and variable costs, are considered over a longer period.