Documente Academic
Documente Profesional
Documente Cultură
Vivek Agarwal
February 11, 2015
Time Taken: 2.5 hours
Solution 1
1. A 1% in the distance of house from a recently built garbage incinerator
results in an increase of 0.312% in price of the house sold. One would
expect that as the distance between a house and garbage incinerator increases its price would go up. Harmful gases released by an incinerator are
more likely to be found in houses closer to the incinerator and are therefore likely to reduce to the demand for such house. Hence, the positive
sign of the coefficient on log(dist) is expected.
2. No. Controlling for several other factors has been ignored. It is likely
that the incinerators are actually installed by the local authorities based
on other criterion such as availability of land, distance from water sources
(to prevent contamination, etc.). Clearly these factors also determine the
price of the houses, therefore ignoring them creates a bias.
3. As discussed above, distance from say a clean water body (lake, sea, etc.)
can increase the price of a house dramatically. Further, incinerators are
usually not installed close to water bodies to prevent contamination, etc.
Therefore, proximity to a water body increases the price, but also has an
eect by the way increasing the distance.
Solution 2
1. The average salary is $ 957.9455, while the average IQ of the population
is 101.2824. The standard deviation of IQ in the sample is 15.05264. See
Figure 1.
2. The simple regression model has been presented in Figure2. The equation
is:
c
wage
d = 116.9916 + 8.303064IQ
(1)
(2)
This model predicts that a one unit change in IQ will result in a 0.88072%
change in wage. Further, an increase of 15 points in IQ will result in an
increase which is 15 times the coefficient of IQ in the model, i.e. 13.2108%.
However, note that this is an approximation and might not be accurate.
Solution 3
1. A lower value of rank reflects a higher academic superiority of the school.
Further, a higher academic superiority is expected to result in students
with higher abilities - a valued asset for employers - leading to higher
starting salaries. Therefore, rank is inversely related to salary. This results
in the expectation of 5 0.
2. An increase in LSAT reflects a higher ability for a better job performance
and consequently would result in higher salaries. Therefore, one would
2%
Solution 4
1. The estimated equation is presented below. Also, see Figure??.
d =
price
d t + 15.19819bdrms
d
19.315 + 0.1284362sqrf
(3)
2. The estimated increase in the price for a house is $0 with addition of one
more bedroom, holding square footage constant. This results from the
fact that the coefficient of bdrms is not statistically significant even at a
significance level of 10%. Hence, its coefficient is indistinguishable from 0.
3. The estimated increase in the price for a house with an additional bedroom
that is 140 square feet in size is $33,179 (= ( 1 (sqrft) + 2 (bdrms))
1000).
Solution 5
1. The average value of prpblck is 0.1134864, and the average value of income
is $47053.78. See Figure 5. prpblck is unit-less and is ratio while income
has the units of $ per year and is ratio.
2. The estimated equation is presented below (See Equation 4). Also, see
(4)
(5)
value of prpblck
decreases from 0.1215803 to 0.0728072. See Figures 8 &
9
6
Solution 6
1. MLR1: Although the few points corresponding to higher values of ln(income)
& prpblck tend to skew the best fit line; however generally a trend can be
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