Which of the Following Statements Is True

question 5

Multiple Choice

Which of the following statements is true?

• A) The method used in regression analysis for incorporating a categorical variable into the model is by organizing the categorical variable into one or more indicator variables.
• B) An indicator variable is a dependent variable whose value is set at either zero or one.
• C) There are four possible responses listed for marital status. Based on this, four indicator variables will need to be created and incorporated into the regression model.
• D) On a survey there is a question that asks whether someone lives in a house, apartment, or condominium. These three responses could be coded in an indicator variable using values of 0, 1, and 2.
• E) The scatterplot can show whether using an indicator variable in the model is appropriate. However, it gives no clue about using an interaction term.

Identify the role of market elasticity in determining the deadweight loss and tax revenue.

Understand the change in consumer and producer surplus due to taxes.

Comprehend the relationship between tax size, tax revenue, and deadweight loss.

Understand how a government-imposed tax affects consumer surplus, producer surplus, and total surplus.

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Definitions:

Firm

A business enterprise or establishment, often involved in the production and sale of goods or services.

Re-Order Point

A predetermined inventory level at which new stock should be ordered to replenish supplies before reaching a critically low or stock-out situation.

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.