Bill and Hillary Both Work for the Same Bakery

question 162

Multiple Choice

Bill and Hillary both work for the same bakery.Bill is an expert pastry chef who begins baking at 4a.m.Hillary is a bookkeeper who works a regular 9-5 work day.Bill earns twice as much as Hillary.Which of the following could explain the higher wages that Bill earns?

• A) The employer is discriminating against women.
• B) The employer is paying a compensating differential for a job that starts very early in the morning.
• C) The employer is rewarding Bill for acquiring the human capital of a pastry chef.
• D) All of the above could be correct.

---

Definitions:

Multiple Regression

A statistical technique used to model the relationship between two or more independent variables and a dependent variable by fitting a linear equation to observed data.

Nominal Variable

A categorical variable with two or more categories that have no intrinsic ordering to them.

Regression Model

A mathematical method applied to forecast the outcome of a target variable by analyzing the influence of one or several predictor variables.

Indicator Variable

A variable that takes on the value of 0 or 1 to indicate the absence or presence of some categorical effect or attribute.