BA 213: Introductory Econometrics

Assignment 1
Instructions:
1. The last date to submit the assignment is March 20, 2020. No assignment
will be accepted after this date.
2. Solve the assignment in the assignment register.
3. Answer the questions in sequence.
4. Use of only blue/black ink is allowed.
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1
Q1. Prove that the sample variance defined by S’2 = ∑( 𝑥𝑖 − 𝑥̅ )2 is a biased
𝑛
estimator of population variance σ2 while the sample variance defined by S2 =
1
∑( 𝑥𝑖 − 𝑥̅ )2 is an unbiased estimator of σ2.
𝑛−1

Q2. There are two traffic lights on a commuter’s route to and from work. Let X1
be the number of lights at which the commuter must stop on his way to work, and
X2 be the number of lights at which he must stop when returning from work.
Suppose these two variables are independent, each with pmf given in the
accompanying table (so X1, X2 is a random sample of size n = 2).
x1 0 1 2
p(x1) 0.2 0.5 0.3

a. Determine the pmf of To = X1 + X2

b. Calculate µ 𝑇0 . How does it relate to µ, the population mean?

c. Calculate 𝜎𝑇0 2 . How does it relate to 𝜎 2 , the population variance?

Q3. Explain the desirable properties of estimators using suitable examples.

Q4. Show that if 𝑋 ~ 𝐵𝑖𝑛 (𝑛, 𝑝), then the following estimator
1
𝑋+ √𝑛
2
t=
𝑛+ √𝑛

is a biased estimator of p. When does the bias disappear?

Q5. Find the Maximum Likelihood Estimators of population mean and population
variance for a normally distributed population.
Q6. A sample of 20 bags resulted in a sample average weight of 1,584 kg and a
sample standard deviation of 607 kg. Calculate and interpret a confidence interval
at the 99% level for the true average weight of the bags.
Q7. Let X ~ N (μ, σ2). Two random samples of size n1 and n2 with respective
means 𝑋̅1 and 𝑋̅2 are obtained. The estimators of the population mean are
proposed to be

1 𝑛1 𝑋̅1 + 𝑛2 𝑋̅2
𝜇̂ = (𝑋̅1 + 𝑋̅2 ) and 𝜇̃ =
2 𝑛 1 + 𝑛2
Which of these is a more efficient estimator?
Q8. A sample of trained typists was selected, and the preferred keyboard height
was determined for each typist. The resulting sample average preferred height
was 80 cm. Assuming that the preferred height is normally distributed with σ = 2
cm, obtain a 95% confidence interval for μ, i.e. the true average preferred height
for the population of all experienced typists. Also, interpret the interval.
Q9. A researcher wishes to estimate the mean of a population by using a
sufficiently large sample. The probability is 0.95 that the sample mean will not
differ from the true mean by more than 25% of the standard deviation. How large
a sample should be taken?
Q10. Prove that the mean of the sampling distribution of the sample means is
equal to the population mean i.e. E (𝑋̅ ) = μ and variance of the sampling
σ2
distribution of the sample mean is V (𝑋̅) = .
𝑛

Q11. Explain why the sampling approach is better than the census approach.
Q12. Suppose that a random sample of 50 bottles of a particular brand of cough
syrup is selected and the alcohol content of each bottle is determined. Let µ denote
the average alcohol content for the population of all bottles of the brand under
study. Suppose that the resulting 95% confidence interval is (7.8, 9.4).
a. Would a 90% confidence interval calculated from this same sample have been
narrower or wider than the given interval? Explain your reasoning.
b. Consider the following statement: There is a 95% chance that µ is between 7.8
and 9.4. Is this statement correct? Why or why not?
c. Consider the following statement: We can be highly confident that 95% of all
bottles of this type of cough syrup have an alcohol content that is between 7.8 and
9.4. Is this statement correct? Why or why not?
d. Consider the following statement: If the process of selecting a sample of size
50 and then computing the corresponding 95% interval is repeated 100 times, 95
of the resulting intervals will include µ. Is this statement correct? Why or why
not?
Q13. Show that if 𝜃̂ is an unbiased estimator of 𝜃 and Var (𝜃̂) ≠ 0, then 𝜃̂ 2 is not
an unbiased estimator of 𝜃 2 .
Q14. A bottled drinking water company supplies water to homes in 15-gallon
containers. The manager wants to estimate the mean number of containers the
typical home uses each month. A sample of 75 homes is taken and the number of
containers is recorded. The mean is 𝑋̅ = 3.2 and s = 0.78.
(a)What would a 92% interval reveal?
(b) How many homes must be sampled to be 99% confident that the error is not
more than 0.10 containers?
Q15. The mean and variance of a random sample of 64 observations were
computed as 160 and 100 respectively.
(a) Compute the 95% confidence interval for population mean.
(b) If the investigator wants to be 95% confident, that the error in the estimate
of the population mean shouldn’t exceed ±1.4, how many additional
observations are required?