{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

2010 Spring Midterm Exam 2

# 2010 Spring Midterm Exam 2 - Midterm Exam 2 Econ 360 Spring...

This preview shows pages 1–5. Sign up to view the full content.

Midterm Exam 2 Econ 360 - Spring 2010 Professor Mumford Wednesday, March 7, 2010 [email protected] YOUR NAME: Answer all questions clearly and legibly. Show all of your work in the space provided. Do not use additional sheets or write on the back of the page. Do not refer to your notes, the text book, or any other materials during the exam. There are 100 points possible. Maximum points for each question are noted in parentheses. You have one hour and ten minutes to complete the exam. Good luck! 1. (12 points) Define or explain the following terms: a. (3 points) linear probability model b. (3 points) multicollinearity c. (3 points) adjusted R-squared d. (3 points) beta coefficients (standardized coefficients)

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2. (9 points) Consider the simple regression model y i = β 0 + β 1 x i + u i . Derive the OLS estimators ˆ β 0 and ˆ β 1 as the solution to the problem of minimizing the sum of squared residuals. Show the complete derivation. 3. (4 points) Show that n X i =1 y i ( x i - ¯ x ) = n X i =1 ( x i - ¯ x ) ( y i - ¯ y )
4. (15 points) Consider the following population model: ln ( wage ) = β 0 + β 1 educ + β 2 ability + u. which satisfies assumptions MLR.1 - MLR.4. Suppose that our primary interest is in β 1 , the partial effect of years of education on ln ( wage ). We do not have data for ability which makes it impossible to estimate the population model. Instead we regress ln ( wage ) on educ and obtain: ˜ ln ( wage ) = ˜ β 0 + ˜ β 1 educ. a. (2 points) State the zero conditional mean assumption for the population model. b. (4 points) Derive the bias in ˜ β 1 . c. (3 points) Under what conditions is the bias equal to zero? d. (3 points)You observe the individual’s SAT score. You are considering using SAT as a proxy for ability . What conditions must be satisfied for SAT to be a good proxy for ability ? e. (3 points) Explain what regression you should run to use SAT as a proxy for ability . If SAT is a good proxy for ability , will you be able to obtain unbiased estimates of β 1 and β 2 ?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
5. (16 Points) You have been asked to analyze the data from an experiment designed by an economist to examine productivity under two different compensation methods. Workers
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 9

2010 Spring Midterm Exam 2 - Midterm Exam 2 Econ 360 Spring...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online