TABLE 13-10 You Worked as an Intern at We Always Win Car

question 34

Multiple Choice

TABLE 13-10
You worked as an intern at We Always Win Car Insurance Company last summer. You noticed that individual car insurance premiums depend very much on the age of the individual, the number of traffic tickets received by the individual, and the population density of the city in which the individual lives. You performed a regression analysis in Microsoft Excel and obtained the following information:

-To explain personal consumption (CONS) measured in dollars, data is collected for
INC personal income in dollars
CRDTLIM: $1 plus the credit limit in dollars available to the individual
APR: mean annualized percentage interest rate for borrowing for the individual
ADVT: per person advertising expenditure in dollars by manufacturers in the city where the individual lives
SEX: gender of the individual; 1 if female, 0 if male
A regression analysis was performed with CONS as the dependent variable and log(CRDTLIM) , log(APR) , log(ADVT) , and GENDER as the independent variables. The estimated model was

= 2) 28 - 0.29 log(CRDTLIM) + 5.77 log(APR) + 2.35 log(ADVT) + 0.39 SEX
What is the correct interpretation for the estimated coefficient for GENDER?

• A) Holding the effect of the other independent variables constant, mean personal consumption for females is estimated to be $0.39 higher than males.
• B) Holding the effect of the other independent variables constant, mean personal consumption for males is estimated to be $0.39 higher than females.
• C) Holding the effect of the other independent variables constant, mean personal consumption for females is estimated to be 0.39% higher than males.
• D) Holding the effect of the other independent variables constant, mean personal consumption for males is estimated to be 0.39% higher than females.

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Definitions:

Ambrosia

Often referred to in mythology as the food or drink of the gods, typically signifying something with an exquisite taste or smell.

Red Price

There is no standard definition for this term in economics; it may be used informally to denote a specific pricing strategy or condition but lacks a general meaning.

Bubble Gum

A variety of gum that can be blown into a bubble from the mouth.

Ambrosia

In mythology, ambrosia is often considered the food or drink of the gods, granting longevity or immortality upon consumption.