Consider the Following Regression Model: Log(y)= β₀+ β₁x₁+ β₂x₁²

question 9

Multiple Choice

Consider the following regression model: log(y) = β₀+ β₁x₁+ β₂x₁² + β₃x₃+ u.This model will suffer from functional form misspecification if _____.

• A)β₀ is omitted from the model
• B)u is heteroskedastic
• C)x₁² is omitted from the model
• D)x₃ is a binary variable

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Definitions:

Triangular Distribution

A probability distribution with a shape formed by a triangle, which is specified by a minimum, a maximum, and a mode value.

Expected Value

The weighted average of all possible values of a random variable, taking into account their probabilities.

Bounded Distribution

A statistical distribution with both a minimum and maximum value, limiting the range of possible outcomes.

Uniform Continuous Probability Distribution

A type of distribution where all outcomes in a certain interval are equally likely.