Consider a Situation Where Economic Theory Suggests That You Impose

question 20

Essay

Consider a situation where economic theory suggests that you impose certain restrictions on your estimated multiple regression function. These may involve the equality of parameters, such as the returns to education and on the job training in earnings functions, or the sum of coefficients, such as constant returns to scale in a production function. To test the validity of your restrictions, you have your statistical package calculate the corresponding F-statistic. Find the critical value from the F-distribution at the 5% and 1% level, and comment whether or not you will reject the null hypothesis in each of the following cases.
(a)number of observations: 152; number of restrictions: 3; F-statistic: 3.21
(b)number of observations: 1,732; number of restrictions:7; F-statistic: 4.92
(c)number of observations: 63; number of restrictions: 1; F-statistic: 2.47
(d)number of observations: 4,000; number of restrictions: 5; F-statistic: 1.82
(e)Explain why you can use the F_q,∞ distribution to compute the critical values in (a)-(d).

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Definitions:

Bruising

Physical damage that appears on the skin or body tissues as a result of blunt impact, characterized by discoloration and swelling.

Overhead

The ongoing administrative and operational costs of running a business that are not directly attributable to the production of goods or services.

Operating Profit

Income generated from the principal activities of a company, not including interest and tax deductions.

Retail Price

The price at which goods or services are sold to the public.