The Error Term Is Homoskedastic If A $\operatorname { var } \left( u _ { i } \mid X _ { i } = x \right)$

question 10

Short Answer

The error term is homoskedastic if a. $\operatorname { var } \left( u _ { i } \mid X _ { i } = x \right)$ is constant for $i = 1 , \ldots , n$
b. $\operatorname { var } \left( u _ { i } \mid X _ { i } = x \right)$ depends on $x$
c. $X _ { i }$ is normally distributed
d. there are no outliers.

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Definitions:

Economies of Scale

The cost advantage that arises with increased output of a product, where average costs start to fall as production scales up.

Marginal Returns

denotes the additional output obtained by adding one more unit of a specific input, while keeping other inputs constant.

Diseconomies of Scale

The scenario where costs start increasing as a company or project becomes too large, leading to inefficiency.

Bureaucratic

Relating to a system of government in which most of the important decisions are made by state officials rather than by elected representatives.