Exclusion Restrictions Are Said to Be Imposed in a Two-Equation

question 19

Multiple Choice

Exclusion restrictions are said to be imposed in a two-equation simultaneous equations model if it is assumed that:

• A)certain exogenous variables do not appear in the first equation and others are absent from the second equation.
• B)certain endogenous variables do not appear in the first equation and others are absent from the second equation.
• C)the error terms in each equation is correlated with the exogenous variables.
• D)the error terms in each equation is uncorrelated with the exogenous variables.

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Definitions:

Indistinguishable

Incapable of being identified as different or distinct, often used in contexts where two or more items appear exactly alike.

MR

In economics, Marginal Revenue, referring to the increase in revenue that results from the sale of one additional unit of output.

MC

This stands for Marginal Cost, which is the cost of producing one additional unit of a product.

Maximizing Profits

The process of adjusting production and operational strategies to achieve the highest possible profit from business activities.