Consider the Following Least Squares Specification Between Testscores and the Student-Teacher

question 63

Multiple Choice

Consider the following least squares specification between testscores and the student-teacher ratio: $\widehat{\text { TestScore }}$ = 557.8 + 36.42 ln (Income) . According to this equation, a 1% increase income is associated with an increase in test scores of

• A)0.36 points
• B)36.42 points
• C)557.8 points
• D)cannot be determined from the information given here

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Definitions:

EBIT

Earnings Before Interest and Taxes, a financial metric that calculates a firm’s profit excluding interest and income tax expenses.

Variable Cost

A cost that varies directly with the level of production or volume of output, as opposed to fixed costs, which remain constant regardless of activity level.

Direct Labor

The wages of employees who are directly involved in the production of goods or services.

Direct Materials

Raw materials that are used directly in the manufacturing of a product and can be directly attributed to the product.