Given the Model Crime_it=B₀+B₁Police_i,t+e_it

question 1

Multiple Choice

Given the model
Crime_it=B₀+B₁Police_i,t+e_it,
Which one of the following potential instrumental variables do you think would not satisfy the inclusion condition?

• A) The wealth of the city
• B) The population density of the city
• C) The number of guns in the city
• D) Number of candy stores in the city

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service supplied matches the quantity demanded, resulting in market stability.

Output

The total amount of goods or services produced by a business, industry, or economy.

Economic Efficiency

A situation where resources are utilized in the most optimal manner, producing the desired output with minimum waste or expense.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive.