Consider the following regression model: log(y) = 0 + ₁x₁ + 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

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The model includes interaction terms between the independent variables, but one of them, x₁², has been omitted from the model. This indicates that the model suffers from functional form misspecification, as the interaction between x and these variables might be important in explaining the variation in the dependent variable. The model suffers from functional form misspecification if x₁² is omitted from the model since it is a function of x₁ which is an observed explanatory variable.

Consider the Following Regression Model: Log(y) = 0