To Check Out Whether the Regression Assumption Involving Normality of the Error

question 102

True/False

To check out whether the regression assumption involving normality of the error terms is valid, it is appropriate to construct a normal probability plot. If this plot forms a straight line from the lower left- hand corner diagonally up to the upper right-hand corner, the error terms may be assumed to be normally distributed.

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Definitions:

Producer Surplus

The divergence between what producers expect to get for a good or service and the actual compensation they receive.

Deadweight Loss

The loss of economic efficiency when the equilibrium outcome is not achievable or not achieved in a market.

Perfectly Inelastic

A market condition where the quantity demanded or supplied does not change in response to price changes.

Deadweight Loss

An economic inefficiency that occurs when the total welfare in a market is not maximized, resulting from distortions such as taxes, subsidies, or monopolies.