In practice, the most difficult aspect of IV estimation is
A) finding instruments that are both relevant and exogenous.
B) that you have to use two stages in the estimation process.
C) calculating the J-statistic.
D) finding instruments that are exogenous. Relevant instruments are easy to find.
Ans: A) finding instruments that are both relevant and exogenous.
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The larger the number of firms in an industry
A) the more intense the rivalry among firms. B) the larger the potential number of market segments. C) the easier it is to implicitly collude to fix prices. D) the greater the need for a price enforcement mechanism.
Which of the following statements is NOT true about exchanges in the market system?
A) In voluntary exchange both parties are better off because of the exchange. B) Exchanges occur only in situations of barter where the market price is irrelevant. C) Prices indicate what is relatively abundant and what is relatively scarce. D) Transaction costs in exchanges include the cost of enforcing a contract as well as the costs of information.
Demand for a good is inelastic if:
A. total revenue decreases when price decreases. B. the quantity effect outweighs the price effect of a price increase. C. the absolute value of price elasticity is greater than 1. D. None of these is true.
An IOU reflecting the corporation's promise to pay the holder a fixed sum of money at a designated maturity date plus an annual interest payment until maturity is
a. a bond b. a stock certificate c. a prospectus d. a golden parachute e. an underwriting note