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Q1 A firm is contemplating opening a new regional office. An accounting cost analysis of monthly operating costs at a dozen of its regional outlets

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Q1 A firm is contemplating opening a new regional office. An accounting cost analysis of monthly operating costs at a dozen of its regional outlets reveals fixed costs of $4,500 per month and average variable costs of AVC=859-50.006Q where AV (' is average variable costs (in dollars) and @ is output measured by mumber of stock and bond trades. Marginal cost is given by MC=5$59-50.012Q). A typical stock or bond trade results in $100 gross commission income, with the firm paying 35% of this amount to its sales representatives. (1). Estimate the trade volume necessary for the firm to reach a target return of $7,500 per month for a typical office. (20 pomts) (2). Estimate and interpret the elasticity of cost with respect to output at the trade volume found in part (1). (20 points)

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