Answer all questions:

1.The regression result is as follow:

where 'price' is a price of housing (a dependent variable), 'rooms' is a number of rooms, and 'sqfeet' is a house size in square feet.

1.1 Write liner regression equation.

1.2 Are the coefficients of independent variables (X_i) statistically significant at 95% confident interval, using T-test.

1.3 Interpret the estimated R-square

2. MRP_Lis the demand for labour and MFC_Lis the marginal factor (labour) cost.

2.1 What does a firm should do if MRP_L< MFC_L. Explain.

2.2 Suppose that MP_L=60, MP_K=100, W=12, R=20; where MP_Lis marginal product of labour, MP_Kis marginal product of capital, W is cost of labour, and R is cost of capital. Is this firm efficient?

2.3 Suppose that MP_L=60, MP_K=120, W=12, R=20. Is this firm efficient? If not, what do you suggest this firm to be efficient?

3.What is an isoquant? What is different between (1) moving along an isoquant line and (2) shifting to the right or to the left?

4.The Cobb-Douglas production function is Q = 0.7 * L^0.753* K^0.552

4.1 Is this production function constant returns to scale?

4.2 What is the production elasticity of labour?

4.3 What is the production elasticity of capital?

4.4 What happens to the output (Q) if labour (L) decreases by 2% and capital is cut by 2%?