Suppose you've regressed profits on price, assuming a quadratic functional form. Your regression equation is: Profits_i = β₀ + β₁Price_i + β₂Price_i² + U_i. What is the marginal effect of price in this equation? A) β₀ + β₁ + β₂ B) β₁ + β₂ × Price_i C) β₀ + β₁ + 2β₂ D) β₁ + 2β₂ × Price_i

Question

Quizplus · Accepted Answer

The marginal effect of price in a quadratic regression equation is found by taking the derivative of the equation with respect to price. This results in β₁ + 2β₂ * Price, matching choice D.

Suppose You've Regressed Profits on Price, Assuming a Quadratic Functional