Consider the Following to Answer the Question(s) Below

question 15

Multiple Choice

Consider the following to answer the question(s) below:
A Toronto accounting firm estimated a model to explain variation in client profitability. The dependent variable is client net profits and the predictor variables include the hours spent working on the client and indicator variables to denote the type of client-manufacturing, service, or government. The indicator variables have a value of one if the client is the type described. The following are the model results.
-If the number of hours spent on a client is 100, and the client is in the Service industry, what is the predicted net profit?

• A) The predicted net profit is $3,569.55.
• B) The predicted net profit is $1,869.81.
• C) The predicted net profit is $1,283.55.
• D) The predicted net profit is $4,172.08.
• E) The predicted net profit is $3,585.82.

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Definitions:

Perfect Competitor

A theoretical market structure where numerous small firms compete against each other without having any significant market power.

Output

The total amount of goods and services produced by an economy or a firm.

MC

Marginal Cost, which refers to the increase or decrease in the cost of producing one additional unit of a good or service.

ATC

stands for Average Total Cost, which is the sum of all production costs divided by the quantity of output produced; it combines average fixed and variable costs.