THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 189

Multiple Choice

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
In examining the determinants of income,data were collected regarding the characteristics of 45 adults,and the regression lnY = β₀ + β₁ lnX₁ + β₂ lnX₂ + β₃X₃ + ε was used,where Y is the annual income (in thousands of dollars) ,X₁ is the adult's age,X₂ is his/her years of education,and X₃ is a dummy
variable = 1 and is used if the adult is female.You run the regression and obtain the equation
ln
= 6.3 + 0.91 lnx₁ + 1.3 ln x₂ - 0.05x₃.
-How would you interpret the coefficient on years of education?

• A)For every addition in his/her years of education,we would expect the income to increase on average by $1,310,assuming that all the other independent variables in the model are held constant.
• B)For every one percent increase in his/her years of education,we would expect the income to increase on average by 1.3 percent,assuming that all the other independent variables in the model are held constant.
• C)For every 1.3 percent increase in his/her years of education,we would expect the income to increase approximately by $1,000,assuming that all the other independent variables in the model are held constant.
• D)For every one percent increase in his/her years of education,we would expect the income to increase approximately by $1,310,assuming that all the other independent variables in the model are held constant.

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Definitions:

Inventory

The total value of a company's goods and materials held for sale or used in production.

Budgeted Production

The planned level of production output, determined based on forecasted sales and inventory requirements, to guide manufacturing processes.

Units

Basic quantities or measurements in which variables, constants, and other quantities are expressed in various contexts such as physics, chemistry, and mathematics.

Sales Forecast

The estimation of the amount of goods or services that will be sold during a future period.