To Check Out Whether the Regressions Assumption Involving Normality of the Error

question 2

True/False

To check out whether the regressions assumption involving normality of the error terms (residuals) is valid, it is appropriate to construct a normal probability plot. If this plot forms a straight line from the lower-left-hand corner to the upper-right-hand corner, the error terms may be assumed to be normally distributed.

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Definitions:

Variable Input

An economic term describing a factor of production whose quantity can vary based on the level of output or production.

Marginal Revenue Product

The extra income produced through the use of an additional unit of an input, such as labor or capital.

Competitive Labor Market

A labor market where numerous businesses actively seek to hire workers, and numerous workers seek jobs, ensuring balanced job availability and wage rates based on skills and experience.

Wage Rate

The amount of compensation paid to employees for a unit of work or time, often expressed as an hourly rate.