Large Correlations Between Two or More Independent Variables in a Multiple

question 1

Multiple Choice

Large correlations between two or more independent variables in a multiple regression model could result in the problem of ________.

• A)multicollinearity
• B)autocorrelation
• C)partial correlation
• D)rank correlation
• E)non-normality

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Definitions:

Consumer Surplus

The divergence between the total sum consumers are inclined and able to disburse for a merchandise or service, and the total sum they actually disburse.

Negative Externality

A cost that affects a party who did not choose to incur that cost, often associated with production or consumption activities.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision, representing the benefits that could have been received if a different decision were made.

External Cost

An external cost, or negative externality, refers to a cost that a transaction or activity imposes on parties who are not involved in the transaction, such as pollution affecting non-participants.