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1
CHAPTER 1
SOLUTIONS TO PROBLEMS
1.1
It does not make sense to pose the question in terms of causality. Economists would assume
that students choose a mix of studying and working (and other activities, such as attending class,
leisure, and sleeping) based on rational behavior, such as maximizing utility subject to the
constraint that there are only 168 hours in a week.
We can then use statistical methods to
measure the association between studying and working, including regression analysis that we
cover starting in Chapter 2.
But we would not be claiming that one variable “causes” the other.
They are both choice variables of the student.
1.2
(i) Ideally, we could randomly assign students to classes of different sizes.
That is, each
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 Spring '11
 Suzuki
 Econometrics, Regression Analysis, negative correlation, smaller class sizes, larger class size, high pass rates

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