An Economist Is Analysing the Incomes of Professionals (Physicians, Dentists $y = \beta _ { 0 } + \beta _ { 1 } x _ { 1 } + \beta _ { 2 } x _ { 2 } + \beta _ { 3 } x _ { 3 } + \varepsilon$

question 100

Essay

An economist is analysing the incomes of professionals (physicians, dentists and lawyers). He realises that an important factor is the number of years of experience. However, he wants to know if there are differences among the three professional groups. He takes a random sample of 125 professionals and estimates the multiple regression model: $y = \beta _ { 0 } + \beta _ { 1 } x _ { 1 } + \beta _ { 2 } x _ { 2 } + \beta _ { 3 } x _ { 3 } + \varepsilon$ .
where
y
= annual income (in $1000). $x _ { 1 }$ = years of experience. $x _ { 2 }$ = 1 if physician.
= 0 if not. $x _ { 3 }$ = 1 if dentist.
= 0 if not.
The computer output is shown below.
THE REGRESSION EQUATION IS $y =$ $71.65 + 2.07 x _ { 1 } + 10.16 x _ { 2 } - 7.44 x _ { 3 }$ . $$\begin{array} { | c | r r c | } \hline \text { Predictor } & \text { Coef } & \text { StDev } & T \\\hline \text { Constant } & 71.65 & 18.56 & 3.860 \\x _ { 1 } & 2.07 & 0.81 & 2.556 \\x _ { 2 } & 10.16 & 3.16 & 3.215 \\x _ { 3 } & - 7.44 & 2.85 & - 2.611 \\\hline\end{array}$$ S = 42.6 R-Sq = 30.9%. $$\begin{array}{l}\text { ANALYSIS OF VARIANCE }\\\begin{array} { | l | r c c c | } \hline \text { Source of Variation } & \text { df } & \text { SS } & \text { MS } & F \\\hline \text { Regression } & 3 & 98008 & 32669.333 & 18.008 \\\text { Error } & 121 & 219508 & 1814.116 & \\\hline \text { Total } & 124 & 317516 & & \\\hline\end{array}\end{array}$$ Is there enough evidence at the1% significant level to conclude that physicians earn more on average than lawyers?

Identify key global leaders in exports and understand the significance of their roles in international trade.

Distinguish between labor-intensive, land-intensive, and capital-intensive commodities.

Understand and apply the concept of opportunity costs in the context of international trade.

Recognize the impact of different production efficiencies on international trade.

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Definitions:

Tax Tables

Charts or tables provided by tax authorities that show the amount of tax payable based on income earned, used to calculate tax liabilities.

Shareholders' Wealth

The total value of a company's shares, reflecting the overall financial well-being and investment attractiveness of the company to its shareholders.

Weighted Average Cost of Capital (WACC)

A calculation of a company's cost of capital where each category of capital is proportionally weighted, including equity, debt, and other forms of financing.

Operating Costs

Expenses associated with the day-to-day functions of a business, excluding the cost of goods sold.