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SampleMidtermQuestions - Economics 122B M idterm 1 0 This...

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Economics 122B Midterm 1 October 27, 209 Page 1 of 7 This is a closed book exam, except that you can have one 2-sided sheet of notes. Please be sure to put your name and UCI ID# in the upper right corner of each sheet you turn in, and don’t staple your sheets together since we will be scanning them. Please completely fill out the Rapid Return Cover sheet – including your assigned seat number. Do not leave the exam room until you have turned in your exam and your name has been checked off the class roster by the instructor or TA . Do not write your answers on this exam –put them on separate sheets of paper. Please use black or dark blue ink or pencil. Be sure to show your work for partial credit. There are 100 points possible, and the points for each sub-question are in parenthesis at the beginning of the question. PART 1 (50 points) 1.. (8 points) Suppose that instead of fitting the regression model i ii YX αβ µ = ++ , you instead fit the model i YZ γδ ε = where 10 2 ZX = + . How are the least-squares estimators ˆ γ and ˆ δ for this second model related to the corresponding LS estimators ˆ α and ˆ β of the linear model? (In other words, obtain ˆ and ˆ as a function of ˆ and ˆ ). 2. (12 points) Using a random sample of 670 individuals for the population of people in the workforce in 1976, we want to estimate the impact of education on wages. Let wage denote hourly wage in 1976 U.S. dollars and let educ denote years of schooling. We obtain the following OLS regression line: wage = -0.54 + 0.54educ . How do you interpret the slope of this regression line? What is the expected difference in the hourly wage between a worker that finished four years of college and a worker with finished high school? What is the predicted wage for a person with one year of education? Does that make sense? If it is not, what is the name of this problem in econometrics? How do we deal with it? 3. (30 points) Suppose you are interested in the effect of skipping classes on college GPA, and collect a sample of economic variables from 400 college students to analyze the problem. Included in your data are college GPA on a four-point scale (COLGPA), high school GPA on a four-point scale (HSGPA), achievement test score (ATS), and the average number of Economics 122B lectures missed per week (SKIP). Running a regression of the dependent variable COLGPA on the other explanatory variables including a constant (and homoskedastic errors) yields:
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Economics 122B Midterm 1 October 27, 209 Page 2 of 7 A.
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