In Estimating the Effect of Price on Sales (Sales_i =

question 23

Multiple Choice

In estimating the effect of price on sales (Sales_i = α₀ + α₁Price_i + U_i) , you are attempting to find an instrumental variable that will solve the endogeneity problem caused by the confounding factor of number of competitors being within U_i, which is correlated with price. Which of the following statements would suggest that wholesale costs would satisfy the relevant condition to be a potential instrument variable?

• A) Wholesale costs are uncorrelated with price.
• B) Wholesale costs are correlated with price.
• C) Wholesale costs are uncorrelated with sales.
• D) Wholesale costs are uncorrelated with number of competitors.

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Definitions:

Openness

In psychology, a personality trait that involves the appreciation for new experiences, creativity, and a willingness to entertain novel ideas.

First Impressions

The initial judgments and perceptions formed about someone upon meeting them for the first time, which can be long-lasting and hard to change.

Configural Properties

Features of stimuli that are perceived as a whole, where the arrangement and holistic aspects matter more than the sum of individual components.

Qualities Of Personality Judges

Traits or characteristics that make someone effective at assessing and understanding others’ personalities, such as empathy, insightfulness, and strong observational skills.