1
Econ 122B Problem Set 2
Name
(Print)______________________
Due in class Feb 6
UCI ID________________
_____________
Multiple
Choice Questions
(Choose the best answer, and briefly explain your
reasoning.)
1. Assume we have a simple linear regression model:
ܫ݊ܿ݉݁ ൌ ߙ ߚ כ ܤܯܫ ݑ. Given a random sample from the population, which of
the following statement is true?
a. OLS estimators are biased when
BMI
do not vary much in the sample.
b. OLS estimators are biased when the sample size is small (say 20 observations).
c. OLS estimators are biased when the error
u
captures perseverance and self‐
control, and you believe that people who are perseverant and have more self‐
control are less likely overweight.
d. None of the above.
2. Suppose you are interested in the effect of class attendance on college
performance, and plan to estimate the following model:
݈ܿܩܲܣ ൌ ߙ ߚ כ ݏ݇݅݁݀ ݑ, where
colGPA
is current GPA and
skipped
is the
average number of classes skipped per week. Due to lack of information, students’
motivation is omitted from the regression. Assume that more motive students are
less likely skip classes. OLS estimator of the coefficient for
skipped
will most likely
a) be biased away from zero, so that the impact of
skipped
on
colGPA
is
overestimated.
b) be biased toward zero, so that the impact of
skipped
on
colGPA
is underestimated.
c) be unbiased.
d) be biased, but not enough information to determine if the impact is
overestimated or underestimated.
Questions 3‐5 are based on the following information:
Consider the following population model for household spending on food:
݂݀ ൌ ߙ ߚ
ଵ
כ݅݊ܿߚ
ଶ
כ ݄݄ݏ݅ݖ݁ ݑ, where
food
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 Spring '14
 researcher, OLS estimators, colGPA

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