In the Model Y = β₀ + β₁x + β₂d

question 32

Multiple Choice

In the model y = β₀ + β₁x + β₂d + β₃xd + ε, for a given x and d = 1, the predicted value of y is given by ________.

• A) = b₀ + b₁x + b₂ + b₃x
• B) = b₀ + b₂ + b₁x + b₃x
• C) = (b₀ + b₂) + (b₁ + b₃)x
• D) All of these choices are correct.

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Definitions:

Upward-Sloping Demand

A theoretical market situation where, contrary to the typical downward-sloping demand curve, demand for a good or service increases as its price rises.

Ceteris Paribus

A Latin term meaning “other things constant” that is used when the effect of one change is being described, recognizing that if other things changed, they also could affect the result. Economists often describe the effects of one change, knowing that in the real world, other things might change and also exert an effect.

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a good and the actual market price they pay.

Marginal Benefit

The additional satisfaction or utility that a person receives from consuming one more unit of a good or service.