Suppose You Decide to Build a Model to Explain Why

question 78

Essay

Suppose you decide to build a model to explain why some companies earned more profits in the past year than others did.
(A)What data would you collect?
(B)What variable do you believe would supply the major part of the explanation of the variation in profits?
(C)If you graph the data with profits on the vertical axis and your explanatory variable on the horizontal axis,will the relationship be upward sloping or downward sloping?
(D)What does your answer in part (C)imply for whether the data on profits and the data on your explanatory variable are positively or negatively correlated?

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Definitions:

Human Capital

The economic value of an individual's skills, knowledge, and experience, considered an asset in terms of productivity.

On-the-Job-Training

The practice of teaching employees the skills and competencies needed to perform their jobs directly within the workplace.

Compensating Differential

The additional amount of income that a worker receives for accepting a position that has undesirable aspects, such as high risk or unpleasant conditions.

Narcotics Squad

A specialized police unit focused on enforcing laws against the illegal use and trafficking of drugs.