In the Following Residual Plot

question 7

Multiple Choice

In the following residual plot:

• A) the plot appears to be random, so there are no major concerns.
• B) the plot clearly shows that the residuals are not normally distributed.
• C) there appears to be at least one highly influential observation.
• D) the mean of the error distribution appears to differ from zero.

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Definitions:

Misallocation

The inefficient distribution or use of resources in an economy, often resulting from market failures or government intervention.

Resources

Assets, materials, and inputs needed for the production of goods and services, including time, labor, capital, and natural resources.

Excess Demand

A market condition where the quantity demanded of a good exceeds the quantity supplied, leading to shortages.

Good

A tangible item or product that fulfills a need or desire and is available for purchase.