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Problem set 4

Note: it is not enough to simply generate an output sheet when answering excel based
questions. When submitting excel files, please also include the hypothesis statement and
indicate/highlight:
(1) the rejection region
(2) the test statistic/p-value and
(3) the decision to reject or accept the null hypothesis
(4) a clear statement about what can be concluded with regards to the decision to
reject/fail to reject the null

1) Excel-based – see “xls. file 16-016” attached


An economist wanted to investigate the relationship between office rents (the dependent
variable) and vacancy rates. Accordingly, he took a random sample of monthly office
rents and the percentage of vacant office space in 30 different cities.

a. Determine the regression line


b. Interpret the coefficients.

2) Refer to the problem above


Can we infer that office rents and vacancy rates are linearly related?

3) Refer to the problem above


Predict with 95% confidence the monthly office rent in a city when the vacancy rate is
10%.

4) Refer to the problem above


Are the required conditions (on the error term) satisfied?

4) Excel-based – see “xls. file 17-11” attached


University students often complain that universities reward professors for research, but
not for teaching, and argue that professors react to this situation by devoting more time
and energy to the publication of their findings and less time and energy to classroom
activities. Professors counter that research and teaching go hand in hand: More research
makes better teachers. A student organization at one university decided to investigate the
issue. They randomly selected 50 economics professors who are employed by a multi
campus university. The students recorded the salaries (in $thousands) of the professors,
their average teaching evaluations (on a 10-point scale), and the total number of journal
articles published in their careers. Perform a complete analysis (produce the regression
equation, assess it, and report your findings in table format with appropriate comments).

8) Refer to the problem above


a. Determine whether there are violations of the required conditions (on the error term) in
the regression model.
b. Are we facing a multicollinearity problem?

6) Chapter 16

Critical Thinking # 6, 11

Data Based Exercises # 2, 5

7) Chapter 17

Critical Thinking # 1, 4

Data Based Exercises # 1

Bonus problem

Based on material not covered in class (!)


In a preliminary study to determine whether the installation of a camera designed to catch
cars that go through red light affects the number of violators , the number of red-light
runners was recorded for each day of the week before and after the camera was installed.
These data are listed here. Can we infer that the camera reduces the number of red-light
runners? Conduct the test at the 5% significance level.

Day Sunday Monday Tuesday Wednesday


Before 7 21 27 18
After 8 18 24 19

Day Thursday Friday Saturday


Before 20 24 16
After 16 19 16

Hint: use a paired t-test

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