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.

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Definitions:

Total Cost Curve

A graph that shows the total cost incurred by a firm in the production of goods or services at different levels of output.

Diminishing Returns

The principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good changes as the production volume varies.

Total Product

The overall quantity of output that a firm produces, typically measured within a specific time period under given levels of input.