Which of These Is Not a Reason for Adding a Disturbance

question 16

Multiple Choice

Which of these is not a reason for adding a disturbance term to a regression model ?

• A) Some determinants of the effect variable may be omitted from the model
• B) Some determinants of the effect variable may be unobservable
• C) Some determinants of the independent variable may be omitted from the model
• D) There may be errors in the way that the dependent variable is measured which cannot be modelled

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Definitions:

Private Value

The value of a good or service to an individual or firm for personal use, as opposed to its value to society or the economy at large.

Socially Optimal

A situation or outcome that is best from the society's point of view, where social welfare, including benefits and costs, is maximized.

Economic Well-being

A broad measure of the prosperity and quality of life of individuals or societies, encompassing material, social, and environmental dimensions.

Output Decreased

A reduction in the quantity of goods or services produced by a company, industry, or economy.