The Major Shortcoming of the General Linear Probability Model Y

question 113

Multiple Choice

The major shortcoming of the general linear probability model y = β₀ + β₁x₁ + β₂x₂ + … + β_kx_k+ ε,is that the predicted values of y can be sometimes _______________________.

• A) greater than 0 and less than 1
• B) at least 0 and no more than 1
• C) less than 1 but more than 0
• D) less than 0 or greater than 1

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Definitions:

Producer Surplus

The difference between the amount a producer is willing to accept for a good versus what they actually receive in the market.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, often measured by the area above the supply curve and below the market price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good that buyers are willing to purchase, assuming all other factors remain constant.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied, typically upward sloping.