Which of the Following Is True of Regression Specification Error

question 17

Multiple Choice

Which of the following is true of Regression Specification Error Test (RESET) ?

• A)It tests if the functional form of a regression model is misspecified.
• B)It detects the presence of dummy variables in a regression model.
• C)It helps in the detection of heteroskedasticity when the functional form of the model is correctly specified.
• D)It helps in the detection of multicollinearity among the independent variables in a regression model.

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Definitions:

Firms

Business organizations or entities engaged in commercial, industrial, or professional activities, aiming to generate profits through the provision of goods or services.

Workers

Individuals engaged in any form of economic activity to earn wages or salary.

Market Wage

The prevailing rate of pay for work in a particular field or occupation in the competitive market.

Profit Maximizing

The process of increasing the difference between total revenue and total cost to achieve the highest possible profit.