A Proxy Variable Is a Variable Used in a Regression

question 31

Multiple Choice

A proxy variable is a variable used in a regression equation in order to:

• A) report the r-squared value appropriately.
• B) make the adjustment for the adjusted r-squared.
• C) proxy for a confounding factor in an attempt to alleviate the endogeneity problem.
• D) improve the standard errors on the treatment effect.

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Definitions:

Average Product

The Average Product is an economic term that describes the output per unit of input, calculated by dividing total product by the number of units of input.

Diminishing Returns

The principle where the increase in the quantity of input will, after a certain point, yield progressively smaller increases in output.

Costs Of Production

The total expenses incurred in the manufacturing of a product, including raw materials, labor, and overhead.

Input Prices

The costs or expenses incurred in acquiring the raw materials and services needed to produce a product.