In econometrics, simultaneity arises when:
A. strictly exogenous explanatory variables determine the dependent variable through a step-by-step process.
B. the error term is correlated with both the dependent variable and explanatory variables.
C. one or more of the explanatory variables is jointly determined with the dependent variable.
D. both serial correlation and heteroskedasticity are present in an hypothesized model.
Answer: C
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Adverse selection in insurance requires that
a. potential customers face different levels of risk b. potential customers facing more risk are no more interested in purchasing insurance c. people are not risk averse d. insurers can tell higher risk people from lower risk people
According to the profit-maximization goal, the firm should attempt to maximize short-run profits since there is too much uncertainty associated with long-run profits
a. true b. false
If labor is the only variable input, an increase in the quantity of labor:
a. does not have any effect on the quantity of output. b. causes the output to increase initially at a diminishing rate and then at an increasing rate. c. causes the output to increase at a constant rate till the last worker is hired. d. causes the output to increase initially at an increasing rate and then at a decreasing rate. e. causes the output to decrease at a constant rate till the last worker is hired.
Where Y is GDP, C is consumption, I is investment, (G ) is government spending, (T ) is net taxes, and there is no international trade, public saving equals:
A. T - G. B. Y + T - G. C. Y - C - T. D. Y - T - C.