This is a economics question which require students to use partial derivative.

2. a. Consider the following wage equation (natural logarithms of wages) Page 5 of 9 log(wage) = A + Aeduc+ ,xprnc x xprnc) which we estimate to obtain: log(wage) = O. 1528 + O. 134 leduc + 0.0349xprnc 0.000962(educ x xprnc) (s.e.) (.1722) (.0127) (.0071) (.00054) where wage is measured in dollars, educ is no. Of years of schooling, and XPrnC is experience measured in no, of years. For a person with a college degree (i.e educ=16), show that one additional year of experience leads to an increase in the wage of approximately 2 percent (such as from $50,000 to about $51 ,000). (Hint: use the partial derivative). b. We extend the model in part (a) by adding a quadratic term to the right hand side: xprnc2. Write out the new model. What sign would you expect for the coefficient of this new term and why? Write the expression for the percentage change in wages in response to One more year Of experience. Here a non-numerical answer in terms Of" 's is expected since we do not have the estimated version Of this model. (Hint: use the partial derivative again).