THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
In examining the determinants of income,data were collected regarding the characteristics of 45 adults,and the regression lnY = β 0 + β 1 lnX 1 + β 2 lnX 2 + β 3 X 3 + ε was used,where Y is the annual income (in thousands of dollars),X 1 is the adult's age,X 2 is his/her years of education,and X 3 is a dummy
variable = 1 and is used if the adult is female.You run the regression and obtain the equation
ln
= 6.3 + 0.91 lnx 1 + 1.3 ln x 2 - 0.05x 3 .
-How would you interpret the coefficient on age?
A)As the person's age increases,their income increases at a decreasing rate.
B)As the person's age increases,their income increases at an increasing rate.
C)As the person's age increases,their income at first increases,then eventually decreases.
D)As the person's age increases,their income at first decreases,then eventually increases.

Question

THE NEXT QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION:
In examining the determinants of income,data were collected regarding the characteristics of 45 adults,and the regression lnY = β 0  + β 1  lnX 1 + β 2 lnX 2 + β 3 X 3 + ε was used,where Y is the annual income (in thousands of dollars),X 1 is the adult's age,X 2 is his/her years of education,and X 3 is a dummy
variable = 1 and is used if the adult is female.You run the regression and obtain the equation
ln  
= 6.3 + 0.91 lnx 1 + 1.3 ln x 2 - 0.05x 3 .
-How would you interpret the coefficient on age?
A)As the person's age increases,their income increases at a decreasing rate. 
B)As the person's age increases,their income increases at an increasing rate. 
C)As the person's age increases,their income at first increases,then eventually decreases. 
D)As the person's age increases,their income at first decreases,then eventually increases.

Quizplus · Accepted Answer

The coefficient on age is 0.91, which indicates that as the person's age increases, their income increases. However, the coefficient is less than 1, which means that the increase in income is at a decreasing rate. This suggests that while older individuals may have more experience and skills, they may also face age discrimination and/or limited job opportunities.