Suppose you've regressed profits on price, assuming a quadratic functional form. Your regression equation is:Profitsi=0+1Pricei+2Pricei2+Ui. What is the marginal effect of price in this equation?

Select one:

a.0+1+2

b.1+ 22Pricei

c.1+2Pricei

d.0+1+ 22

Suppose the relationship between temperature and demand for electricity is non-linear, due to the high demand for electricity when it is both very cold and very hot outside. What is the risk of estimating the effect of price on demand for electricity by the regression equation:Electricity Consumptiont=0+1Pricet+2Temperaturet+Ut?

Select one:

a. Electricity consumption will be censored from above.

b. None of the answers is correct.

c. The estimate of1will be biased.

d. The sample will not be representative.

Suppose you've run a regression relatinglog(Output)tolog(Worker Hours)in Excel. You are willing to make the necessary assumptions to deduce causality and run hypothesis tests. Your results are as follows:

Coefficients

Standard Error

t Stat

P-value

Intercept

17.4583044

28.47075584

0.613201297

0.541240031

Log(Worker Hours)

2.699483287

0.711729096

3.792852225

0.000264681

How should you interpret the coefficient on Log(Worker Hours) of 2.69?

Select one:

a. A 2.69% increase in Worker Hours leads to a 1% increase in Output.

b. A 1 unit increase in Worker Hours leads to a 2.69% increase in Output.

c. A 1% increase in Worker Hours leads to a .0269% increase in Output.

d. A 1% increase in Worker Hours leads to a 2.69% increase in Output.

Suppose you are estimating the following model:Yi=0+1Xi+Ui. You believe thevarianceof the unobserved factors (U) varies withX. If this is true, what is the consequence?

Select one:

a. Your estimate of0will be biased.

b. Your estimate for0and1will be biased.

c. None of the above answers is correct

d. Your estimate for1will be biased.