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ECON 306 Homework 4 complete solutions correct answers key

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ECON 306 Homework 4 complete solutions correct answers key

1. (15 points total. 5 parts worth 3 points each.) With this assignment you will find an Excel file called HW4.IPOD.xls. For reference, the variables in this file include:

price = price of IPOD sold on eBay

new = 1 if IPOD is new

scratch = 1 if IPOD is scratched

a. Run the following regression: price = β0+β1*new

b. What is the interpretation of the coefficient on new? (Be specific using the number shown in the STATA output)

c. Hypothesize the sign of the bias, if any, resulting from excluding scratch from the regression. Explain your reasoning.

d. Use STATA to verify (or not) your claim from c). Explain using your STATA output to prove this.

e. Break down the bias into the component pieces (as we did in class) using actual numbers. [Hint you should be running the “shadow regression” to determine the value of α]. Highlight any commands that you use in STATA.

Price

Miles per Gallon

2. (5 points) Suppose you are looking at data on determinants of the price of a new car. The data includes both foreign and domestic cars and provides the number of miles per gallon that each car gets. Using this information, you calculate the following model:

PRICE = 1368.20 + 3221.42*FOREIGN – 0.466*MPG

In the space below, draw two curves that show the relationship between price and miles per gallon for foreign and domestic cars. The graph does not need to be drawn to scale; just be sure to label the y-intercepts, the slopes, and which curve represents foreign cars and which represents domestic: 3. (10 points total. 5 parts worth 2 points each.) With this assignment you will find an Excel file called HW4.Sleep.xls. For reference, the variables in this file include:

sleep = minutes sleep at night, per week

totwrk = min worked per week

educ = years of schooling

yngkid = 1 if children < three yrs old is present

male = 1 if male

a. Run the following regression: sleep = β0 + β1*yngkid + β2*male.

b. Assuming they have no kids, do men or women sleep more? How much more?

c. Run the same regression as above, but this time include an interaction term for male*yngkid. The coefficient for this variable will be β3.

Report the values for the coefficients:

d. How much do females with young kids sleep?

e. How much do males with young kids sleep?

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