Chapter 3, Exercise Solutions, Principles of Econometrics, 3e41EXERCISE 3.6(a) A 95% interval estimator for β2is b2±(0.975,14)t×se(b2). Using our sample of data the corresponding interval estimate is −0.3857 ±2.145 ×0.03601 = (−0.4629, −0.3085) If we used the interval estimator in repeated samples, then 95% of interval estimates like the above one would contain β2. Thus, β2is likely to lie in the range given by the above interval. (b) We set up the hypotheses H0: β2= 0 versus H1: β2< 0. The alternative β2< 0 is chosen because we would expect the unit costs of production to decline as cumulative production
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