8. In Equation 2, holding all other factors constant, when Total_Assets increases by 1%, what is the predicted change in Earnings? a. Increase by 250 dollars. b. Increase by 1284 dollars. c. Increase by 0.25%. d. Increase by 25%. e. None of the above choices (a)-(d).

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Please answer questions 8 and 9 using the following information:
Equation 1: In(Earnings) = 3.21+ 0.55 CollegeDegree.
Equation 2: In(Earnıngs) = 3.86 + 0.65 CollegeDegree + 0.25 In(Total_Assets)
n = 30,000, R? = 0.491.
Earnings measures a worker's monthly earnings. CollegeDegree is an indicator variable that is equal to 1 for
workers who have a college degree, and 0 otherwise. Total_Assets refers to the total assets of the firm that employs
the worker. We take natural logarithm on both Earnings and Total_Assets. Earnings are measured in thousand
dollars, and Total_Assets are measured in million dollars.
Transcribed Image Text:Please answer questions 8 and 9 using the following information: Equation 1: In(Earnings) = 3.21+ 0.55 CollegeDegree. Equation 2: In(Earnıngs) = 3.86 + 0.65 CollegeDegree + 0.25 In(Total_Assets) n = 30,000, R? = 0.491. Earnings measures a worker's monthly earnings. CollegeDegree is an indicator variable that is equal to 1 for workers who have a college degree, and 0 otherwise. Total_Assets refers to the total assets of the firm that employs the worker. We take natural logarithm on both Earnings and Total_Assets. Earnings are measured in thousand dollars, and Total_Assets are measured in million dollars.
8. In Equation 2, holding all other factors constant, when Total_Assets increases by 1%, what is the predicted
change in Earnings?
a. Increase by 250 dollars.
b. Increase by 1284 dollars.
Increase by 0.25%.
d. Increase by 25%.
e. None of the above choices (a)-(d).
c.
9. Suppose Equation 2 is the correct model. That is, a firm's total asset size is a determinant of an employee's
earnings. Are larger firms (measured by total asset size) more likely than smaller firms to employ college
graduates?
a. Larger firms are more likely to hire college graduates.
b. Smaller firms are more likely to hire college graduates.
c. All sizes of firms are equally likely to hire college graduates.
d. We don't have sufficient information to answer this question.
e. None of the above choices (a)-(d).
Transcribed Image Text:8. In Equation 2, holding all other factors constant, when Total_Assets increases by 1%, what is the predicted change in Earnings? a. Increase by 250 dollars. b. Increase by 1284 dollars. Increase by 0.25%. d. Increase by 25%. e. None of the above choices (a)-(d). c. 9. Suppose Equation 2 is the correct model. That is, a firm's total asset size is a determinant of an employee's earnings. Are larger firms (measured by total asset size) more likely than smaller firms to employ college graduates? a. Larger firms are more likely to hire college graduates. b. Smaller firms are more likely to hire college graduates. c. All sizes of firms are equally likely to hire college graduates. d. We don't have sufficient information to answer this question. e. None of the above choices (a)-(d).
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