The following OLS assumption is most likely violated by omitted variables bias:
A) E(ui Xi) = 0
B) (Xi, Yi) i=1,..., n are i.i.d draws from their joint distribution
C) there are no outliers for Xi, ui
D) there is heteroskedasticity
Answer: A
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Government borrowing may crowd out borrowing by private interests because
A) funds are not available at any interest rate. B) the equilibrium interest rate increases. C) the supply curve shifts to the left. D) None of the above.
Advocates of steel tariffs to protect American steel firms realize that when imposing such tariffs the gains of firms are outweighed by the losses to consumers. This implies that
A) such advocates value producer surplus more than consumer surplus. B) such advocates want to help consumers. C) such advocates value consumer surplus more than producer surplus. D) such advocates value producer surplus and consumer surplus equally.
Suppose there is a technology to produce Grendels such that there are diseconomies of scale after the first unit is produced. There are both fixed (a physical plant called a lair) and variable (food that grows in lairs) costs of production. Which statement is true? a. No Grendels will be produced. b. Producing multiple units increases the average fixed cost. c. There will be no more than one
firm in this industry. d. It is cheaper to make five Grendels by buying five lairs and producing one Grendel in each lair than it is to produce five Grendels in one lair. e. This is an impossible situation.
In the long run the primary effect of increasing the quantity of money is higher prices
a. True b. False Indicate whether the statement is true or false