THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 196

Multiple Choice

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
A loan officer is interested in examining the determinants of the total dollar value of residential loans made during a month.The officer used lnY = β₀ + β₁lnX₁ + β₂lnX₂ + β₃lnX₃ + lnε to model the relationship,where Y is the total dollar value of residential loans in a month (in millions of dollars) ,X₁ is the number of loans,X₂ is the interest rate,and X₃ is the dollar value of expenditures of the bank on advertising (in thousands of dollars) .Using data from the past 24 months,she obtained ln
= 0.67 + 1.2 ln x₁ - 1.45 ln x₂ + 1.07 ln x₃.
-How would the officer interpret the coefficient on x₂?

• A)As the interest rate increases,the total loan amount decreases at a decreasing rate.
• B)As the total loan amount increases,the interest rate decreases at an increasing rate.
• C)As the interest rate increases,the total loan amount decreases at an increasing rate.
• D)As the total loan amount increases,the interest rate decreases at a decreasing rate.

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Definitions:

Manufactured Overhead

All indirect costs associated with the manufacturing process, such as utilities, maintenance, and factory rent.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, rent, and salaries of maintenance personnel.

Cost of Goods Manufactured

The cost of goods manufactured is the total cost of producing products during a specific period, including materials, labor, and overhead.

Overapplied Manufacturing Overhead

An instance where overhead costs budgeted for manufacturing surpass the real expenses incurred.