One advantage of estimating a function in which all variables have been transformed into their natural logarithms is that
A) problems with multicollinearity will be eliminated.
B) problems with heteroscedasticity will be eliminated.
C) the estimated slope coefficients are all elasticities.
D) None of the above is correct.

Question

Quizplus · Accepted Answer

Transforming all variables into their natural logarithms allows the estimated slope coefficients to be interpreted as elasticities, which measure the percentage change in the dependent variable for a one percent change in an independent variable.

One Advantage of Estimating a Function in Which All Variables