MGT 200 Lecture Notes - Lecture 2: Simple Linear Regression, Average Variable Cost, White Noise
Document Summary
Nonlinear regression: approximateby adding squared, cubed of the explanatory vairables, transform variables using logs, square roots, or other functions. We want the residuals to look like white noise there is no pattern in them. If the square of a variable is significant, then a simple linear regression will not work. Costs that change with your output (labor, direct inputs, etc. ) Average variable cost = variable cost / q. If price drops below avc you should shut down immediately. Profit is maximized when the price is equal to the marginal cost. Intercept dummies are line shifters that change the intercept but do not change the slope. Slope dummy = dummy variable x numerical variable w a different effect when dummy =0 & dummy = 1. B2utown is the difference between the intercepts of 0 and 1. B3utown_sqft is the different in prices per square foot.
