Suppose the Fitted (Assumed Causal) Regression Line for Your Data

question 44

Multiple Choice

Suppose the fitted (assumed causal) regression line for your data is as follows: Log(Output) = 6.2 + 0.4 × Log(Labor) + 0.5 × Log(Capital)
Interpret the coefficient on Log(Labor) .

• A) Holding capital fixed, when labor goes up by 1, output goes up by 0.4
• B) Holding capital fixed, when labor goes up by 1, output goes up by 6.6
• C) Holding capital fixed, when labor goes up by 1%, output goes up by 0.4%
• D) Holding capital fixed, when labor goes up by 1%, output goes up by 40 units

---

Definitions:

Risk-Averse

A characteristic of individuals preferring outcomes with certain, lower returns compared to outcomes with uncertain, potentially higher returns.

Risk Aversion

The behavior of individuals who, when exposed to uncertainty, would prefer to choose an outcome with a more certain but possibly lower payoff over an outcome with a higher payoff but more uncertainty.

Equilibrium Premium

The price level at which supply and demand for a financial instrument, such as insurance, are balanced, minimizing the risk of loss for insurers.

Equilibrium Quantity

The volume of products or services on offer equals the volume sought by consumers at the equilibrium price in the market.