A Microeconomist Wants to Determine How Corporate Sales Are Influenced

question 54

Multiple Choice

A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies.She proceeds to randomly select 26 large corporations and record information in millions of dollars.A statistical analyst discovers that capital spending by corporations has a significant inverse relationship with wage spending.What should the microeconomist who developed this multiple regression model be particularly concerned with?

• A)Randomness of error terms
• B)Collinearity
• C)Normality of residuals
• D)Missing observations

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Definitions:

Return on Equity

A gauge of a business's earnings effectiveness, demonstrating the profitability produced per dollar invested by shareholders.

Return on Total Assets

A financial ratio that measures a company's ability to generate earnings from its assets.

Gross Margin Percentage

A financial metric used to assess a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.

Net Profit Margin Percentage

A financial ratio that shows the percentage of net income derived from total revenue, emphasizing the profitability of a company after all expenses have been deducted.