Question: Consider the model Yi = B1 + B2Xi + B3X2i + B4X3i + ui where Y = the total cost of production and X =

Consider the model
Yi = B1 + B2Xi + B3X2i + B4X3i + ui
where Y = the total cost of production and X = the output. Since X2 and X3 are functions of X, there is perfect collinearity. Do you agree? Why or why not?

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