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.

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Definitions:

Positive Externalities

Benefits that occur to a third party not directly involved in an economic transaction, leading to underproduction if not addressed.

Patent Policy

Guidelines and laws governing the protection of inventions and innovations, ensuring inventors have exclusive rights to their creations for a predetermined period.

Government Intervention

The active involvement by a government in the economic or social affairs of a country, which can include regulations, subsidies, tariffs, and public services.

Internalize Externalities

The process of adjusting market prices to account for the external costs or benefits generated by a product or service's production or consumption.