The Slope Coefficient Estimate B from a Regression of Profits

question 43

Multiple Choice

The slope coefficient estimate b from a regression of profits on sales of a number of firms in the coal industry is 0.075.How should you interpret this coefficient?

• A) Average profit in the coal industry is 7.5%.
• B) If a firm in the coal industry were to increase its sales by $1, its profits would rise on average by $0.075.
• C) If a firm has 1 more dollar in sales than another firm in the coal industry, it will have 7.5 more cents in profit on average.
• D) Average profit in the coal industry is .75%.
• E) If a firm in the coal industry were to increase its sales by $1, its profits would rise on average by $0.0075.

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Definitions:

Oils

Organic compounds that are liquid at room temperature, often used for cooking, lubrication, and as biofuel.

Fats

Organic compounds consisting of triglycerides that are solid at room temperature, used as a major energy store in animals.

Triglyceride

A type of fat (lipid) found in your blood, formed from a single molecule of glycerol and three fatty acids.

Glycerol Molecule

A simple sugar alcohol compound with three hydroxyl (OH) groups, used as a sweetener and in pharmaceutical and cosmetic products.