Consider the following regression model: log(y) = 
0 + 1x1 +
style="vertical-align:middle;" />2x12 + 3x3 + u. This model will suffer from functional form misspecification if _____.
A. 0 is omitted from the model
B. u is heteroskedastic
C. x12 is omitted from the model
D. x3 is a binary variable
Answer: C
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The traditional typewriter market has collapsed over the past few decades because people prefer personal computers. Yet, some new typewriters continue to be produced and sold at historically low prices
How would you explain the decline in typewriter prices? A) Typewriter producers have become less greedy. B) The demand curve for typewriters has shifted to the left. C) The supply curve for typewriters has shifted to the right. D) The supply curve for typewriters has shifted to the left.
Tobin's q theory adds to neoclassical theory because it ________
A) illustrates the important relationship between tax rates and the incentive to labor B) emphasizes the role played by asset price fluctuations on investment spending C) highlights the impact of a tax increase on business investment D) underlines the relationship between financial innovation and the financial crisis of 2007-2009
An excise tax on gasoline is regressive if
a. rich people buy more gasoline than poor people. b. the demand for gasoline is elastic. c. the tax causes people to buy less gasoline. d. poor people spend a larger portion of their incomes on gasoline than rich people.
In a competitive market, if the existing price is below the equilibrium price, market forces will drive the price:
a. Up and quantity supplied up b. Down and demand down c. Up and quantity supplied down d. Up and supply up