What Is an Advantage of the Correlation Coefficient Over the Covariance

question 109

Multiple Choice

What is an advantage of the correlation coefficient over the covariance?

• A) It falls between 0 and 1.
• B) It falls between -1 and 1.
• C) It is a unit-free measure, therefore making it easier to interpret.
• D) Both answers-that it falls between -1 and 1 and that it is a unit-free measure-are correct.

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Definitions:

Long-Run Supply Curve

A graphical representation showing the quantities of a good or service that a firm is willing and able to supply at different prices over a period where all inputs can be varied.

Constant-Cost Industry

Constant-Cost Industry refers to an industry in which the input prices do not change as industry output changes, leading to a flat supply curve.

Long-Run Equilibrium

A state where all factors of production and inputs can be adjusted by firms, and no economic forces are inducing firms to change their output or production levels.

Average Total Cost

The cost per unit is determined by dividing the overall production costs, which include both fixed and variable expenses, by the total units manufactured.