Quiz 3

Which of the following creates a dummy variable trap?
a. Regressing y on intercept, x, and male
b. Regressing y on intercept, x, and female
c. Regressing y on intercept, x, male, and female
d. None of the above

C

Consider scenario 1 again. If you expect women to earn less than men for a given level of
education, then estimated coefficient of "male" when you regress y on x and male will be
a. Positive
b. Negative
c. Zero
d. None of the above

A

The dummy variable trap is an example of
a. imperfect multicollinearity
b. something that is of theoretical interest only
c. perfect multicollinearity
d. something that does not happen to university or college students

C

Suppose we have estimated ln(wage) = 5 + 3education + 2gender where gender is 1 for male
and 0 for female, wage represents annual income in dollar. The results imply that for a given
level of education,
a. men earn $2 more than women
b. men earn 2% more t

C

To analyze variation in wage across geographical regions - north, south, east, and west of a
country, we should
a. include 4 dummy variables for regions
b. include 3 dummy variables for regions
c. regional variations cannot be captured using dummy variabl

B

The following simple model is used to determine the annual savings of an individual on the
basis of his annual income and education.
Savings(hat) = ??0 + ??0du?? + ??1??nc + ??
The variable 'Edu' takes a value of 1 if the person is educated and the variab

B

What is the meaning of the term "heteroscedasticity"?
a. the variance of the error is not constant
b. the variance of the dependent variable is not constant
c. the errors are not linearly independent of one another
d. the errors have non-zero mean

A

What would be the consequences for the OLS estimator if heteroscedasticity is present in a
regression model but ignored
a. it will be biased
b. it will be inconsistent
c. it will be inefficient
d. all of (a), (b), (c) will be true

C

Which of the following is true of the OLS t statistics?
a. The heteroskedasticity-robust t statistics are justified only if the sample size is large.
b. The heteroskedasticty-robust t statistics are justified only if the sample size is small.
c. The usual

A