Which of the Following INCORRECTLY Addresses the Problem of "Ability

question 12

Multiple Choice

Which of the following INCORRECTLY addresses the problem of "ability bias?"

• A) In the earning function, lnY = a + bS + e, where log wages depend only on the level of schooling, S, and unobserved talent, e. The OLS estimate of the return to schooling b is biased, because unobserved talent, e, is correlated with schooling.
• B) The problem of "ability bias" can be addressed by 'natural experiments" technology.
• C) The estimated coefficient may understate the true causal effect, if more highly educated individuals would have earned more than less educated individuals even with the same amount of schooling as the less educated.
• D) Recent empirical studies have found that the problem of "ability bias" is exaggerated.
• E) The estimated coefficient may overstate the true causal effect, if more highly educated individuals would have earned more than less educated individuals even with the same amount of schooling as the less educated.

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Definitions:

Balance Sheet

A financial briefing that condenses the assets, liabilities, and equity shares of a business at a designated point in time.

Revenues and Expenses

The income generated from normal business operations and the costs incurred to generate that income.

Income Statement

A financial statement that shows a company's revenues and expenses, resulting in net income or loss over a specific period.

Balance Sheet

A financial statement that shows a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.