Which of the Following Is True

question 1

Multiple Choice

Which of the following is true?

• A)A functional form misspecification can occur if the level of a variable is used when the logarithm is more appropriate.
• B)A functional form misspecification occurs only if a key variable is uncorrelated with the error term.
• C)A functional form misspecification does not lead to biasedness in the ordinary least squares estimators.
• D)A functional form misspecification does not lead to inconsistency in the ordinary least squares estimators.

---

Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product for which each supplier's offerings are perfectly substitutable by the consumers.

Profit-Maximizing Rule

A principle stating that firms achieve maximum profit when they produce goods or services to the point where marginal cost equals marginal revenue.

Cost-Minimization Rule

A principle in economics that suggests a firm should produce any given output at the lowest possible cost.

Statements

Assertions or declarations, often formal and written, detailing facts or opinions.