A regression estimates that a worker's hourly productivity (P),measured in units of output,is related to hourly wage (W)as follows: Pi = 4.5 + 0.2Wi.This indicates that
A) a firm raising their wage by $10 will reduce their productivity by 2 units.
B) a firm raising their wage by $10 will raise their productivity by 2 units.
C) a worker will produce 2 units when the firm pays a wage of $10.
D) a worker will produce 4.5 units.

Question

Quizplus · Accepted Answer

The coefficient for hourly wage (W) is positive (0.2), which means that there is a positive relationship between wage and productivity. Therefore, if a firm raises their wage by $10, the worker's hourly productivity is estimated to increase by 2 units (0.2 x $10 = $2, so Pi = 4.5 + $2 = 6.5 units).

A Regression Estimates That a Worker's Hourly Productivity (P),measured in Units