Question

Assume:

1. Researchers estimated a hedonic regression for Boston Back Bay Condominiums.

Given:

1. The estimated rent function is R = 222-1.48F. Here R shows the price or the value of 1 acre of 1-story brownstones (in million dollars).
2. The cost function for these building is given as C=100+2F. F is in acre and 1 acre =43560 square feet.
3. Values of α, β, μ and τ.

α = 222

β = 1.48

μ = 100

τ = 2

      Question:

      According to these estimated equations what should be the optimum     

values of F* and p*?

Answer 1

Answer:- Cauven- Rent function was given af := R = 222-1.48 E where, R: Rent /acre F:- acoe axea in story and Cost function is given as: - C = 100 + 2F where, Ci- cost of /F Now to find the optimal value of F & R, we'll maximize profits (A) to find equlibrium loptimal values of R (ije how much rent should be charged) & F (ije how many acre will be rented) so Profit (A) will by given as: - ㅈ = Total Revenue Total Cost Ta RxF Cx F T = (222 - 1.48F)F (100+ 2F) T = 222F - 1.48F? - 100F - 2F2 now to find optimal value of F F F ارلا تاكلونه T ㅈ , da dF 222 - 2.967F - 100 -4 = 0

TN 7 122 = 6.967 F = 17.5 R* = 1961 196.) 2p² # # In this question (pt) is (pa) is the marrimum paofit of which can be earn at Ft. 2 1225 Pau 3.48F 2135 10 65.75 10 69.25 =