What Is the "Omitted Variable" Problem in Determining Cause and Effect

question 212

Multiple Choice

What is the "omitted variable" problem in determining cause and effect?

• A)It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and effect.
• B)It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and effect.
• C)It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and effect.
• D)It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.

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Definitions:

Cash Disbursements

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Variable Selling And Administrative Expense

Costs that vary with sales volume, such as commissions or shipping charges.

Master Budget

A comprehensive financial planning document that includes all of a company's budgets, combining sales, production, and financial aspects to overview performance.

Sales Forecast

An estimate of the amount of sales a company expects to achieve over a specific period, often used for strategic planning and resource allocation.