Ordinary Least Squares Estimation Is Subject to Heterogeneity Bias If

question 2

Multiple Choice

Ordinary least squares estimation is subject to heterogeneity bias if _____.

• A)the regression model exhibits heteroskedasticty
• B)the unobserved effect is correlated with the observed explanatory variables
• C)the regression model includes a lagged dependent variable
• D)the explanatory variables do not change over time

---

Definitions:

Productive Month

A period during which a company or individual achieves significant production or operational outcomes relative to goals.

Total Fixed Costs

The sum of all costs that remain constant regardless of the level of production or business activity.

Insurance Premiums

The amount paid for insurance policies, covering risks over a period.

Direct Materials

Primary components used in the manufacturing of products, which are directly traceable to the finished product.