Assume That the Variance Depends on a Third Variable,Wi,which Does

question 43

Multiple Choice

Assume that the variance depends on a third variable,Wi,which does not appear in the regression function,and that var(ui|Xi,Wi) = θ0+θ1 .One way to estimate θ0 and θ1consistently is to regress

• A) i on using OLS
• B) i on using OLS
• C) on using OLS
• D) on using OLS

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Definitions:

Marginal Product

Additional output gained by employing one more unit of production.

Second Worker

The term "second worker" can refer to an additional employee hired to perform tasks, often implying the expansion of workforce due to increased workload.

Law of Diminishing Marginal Returns

A principle stating that adding an additional factor of production results in smaller increases in output after a certain point, holding other inputs constant.

Variable Input

An input used in production that can be adjusted in the short term, such as labor or raw materials.