A natural latent variable for a probit model for modeling the purchase of a good by consumers would be which of the following?
A) Profits
B) Net revenues
C) Costs
D) Utility

Question

Quizplus · Accepted Answer

In a probit model for modeling the purchase of a good by consumers, the natural latent variable would be the utility that a consumer derives from the good. This latent variable is not directly observable, but is inferred from the observed purchase decision. Profits, net revenues, and costs are not latent variables, but are instead observable quantities that are affected by the purchase decision.

A Natural Latent Variable for a Probit Model for Modeling