The Determining Function That Drives Share of Accepted Job Offers

question 33

Multiple Choice

The determining function that drives share of accepted job offers for a company is given by the following equation: AcceptedOffers_t = α₀ + α₁StartingSalary_t + α₂EconomicClimate_t + U_t, where the unit of observation is particular month (t) . Suppose one wanted to use the national unemployment rate (unemployment_t) as a proxy for EconomicClimate. Which of the following would be a condition that would rule out the unemployment rate being a good proxy for economic climate?

• A) α₂ < 0
• B) Unemployment rate to be correlated with "other factors" (U_t)
• C) α₂ > 0
• D) EconomicClimate is correlated with StartingSalary

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Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance.

Demand

The desire and ability of consumers to purchase goods or services at a given price.

Fixed Costs

Costs that do not vary with the level of output or sales, such as rent, salaries, and insurance premiums, remaining constant regardless of business activity.

Marginal Costs

The expense incurred by manufacturing an extra unit of a product or service.