THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION

question 145

Multiple Choice

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
You are interested in examining the factors that determine the average length of stay in a hospital across states.You collect data on the following variables:
Y = statewide average hospital stay
X₁ = median state income
X₂ = 1 if the state is in the Northeast,0 otherwise
X₃ = 1 if the state is in the South,0 otherwise
X₄ = 1 if the state is in the Midwest,0 otherwise
X₅ = 1 if the state is in the West,0 otherwise
-You run the following regression: Y = β₀ + β₁X₁ + β₂X₂ + β₃X₃ + β₄X₄.What effect does being a state in the West have on the average length of hospital stay?

• A)β₅
• B)β₀β₅
• C)β₀
• D)Cannot determine the answer with this specification

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Definitions:

P/E Ratios

The Price-to-Earnings Ratio, a valuation metric comparing a company's current share price to its per-share earnings, used to evaluate stock price reasonableness.

Ceteris Paribus

A Latin term meaning "all other things being equal," used in economics to isolate the effect of one variable by holding others constant.

Expected ROE

The anticipated return on equity, predicting future profitability by estimating the rate of return on shareholders' equity.

Multistage DDM

A version of the Dividend Discount Model which assumes dividends grow at different rates in different stages of a company's life.