MGEB12 – Quantitative Methods in Economics-II

Summer 2023
Test-2
Instructor: A. Mazaheri
Instructions: This is a closed book test. A formula sheet is attached. You are allowed the use
of a calculator.
Write your full name and your student ID # on both this test book as well as the
Scantron paper.

You have 90 Minutes.

Good Luck!
Last
Name:

First
Name:

ID

FOR MARKERS ONLY:

MC Q#1 Q#2 Total

Marks Earned

Maximum Marks
64 16 20 100
Possible

The University of Toronto's Code of Behaviour on Academic Matters applies to all

University of Toronto Scarborough students. The Code prohibits all forms of
academic dishonesty including, but not limited to, cheating, plagiarism, and the use of
unauthorized aids. Students violating the Code may be subject to penalties up to and
including suspension or expulsion from the University.
 Part A (Long Questions)
Question-1 (16 Points) Answer the following two separate parts:

A survey of employees at corporations in Canada found that out of 1300 full-time

employees and 290 part-time employees, 40% of the full-time employees and 32%
of the part-time employees were saving at least 12% of their earnings.

We are interested in determining if the proportion of full-time 12%+ savers by full-time

employees is 3% more than that of part-time employees.

a) [6 Points] First setup the hypothesis then find the p-value of the test and conduct the
test at 5%. In a maximum of three sentences interpret the p-value and make a conclusion
(inference).

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b (10 points) A study on the relation between grade level and mean score on
mathematics test is to be conducted. The following data is collected for random samples
of Grade-3 and Grade-5:

Grade-3 Grade-5
Sample size n1 = 26 n2 = 16
Mean score = 81 = 84
Sample standard deviation S1 = 4 S2 = 5

b1(5 Points) Test at 5% if these two populations have similar variances. (Make sure to set
up the null and alternative hypothesis before you perform your test)

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b2(5 Points) Use the p-value method to test if higher grade levels have higher mean test
scores.

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Question-2 (20 Points) In an attempt to predict final marks for MGEB12 using Test-2
marks, 250 observations from those who finished the course in the Winter of 2023 are
collected and the sample statistics are as reported in what follows. Here Y is final marks
(from 100) and X is Test-2 marks (from 100).

Y X Y*Y X*X X*Y

. . . . .
. . . . .
. . . . .
Total 13214.5 17567 767734.8 1318679 980960

Assume a simple regression model. (Note: Please round to two digits)

a) [5 points] Find the estimated simple regression equation and briefly interpret the
coefficients.

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b) [8 marks] The scatter plot of the data is provided below:

100

90

80

70

60

50

40

30

20

10

0
0 20 40 60 80 100 120

b.1) (4 Points) Graph the estimated regression line on the chart. Consider two observations
(X = 80, Y = 20) (X = 65, Y = 68.5). Carefully identify the sources of variation for these two
observations.

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b.2) (4 Points) List the set of OLS assumptions. In one or two sentences, explain how –
using residual analysis – you would verify each of the assumptions. Indicate – if any –
which of the assumption is violated in this regression and why.

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c) [3 Points] Calculate R2 of this regression. Briefly interpret this number.

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d) [4 Points] A friend of yours scored 75 on Test-2. what would be 99% interval estimate
for the final mark of this student?

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 Part B (Multiple Choice)
FORM 1
For the following 17 questions, choose the most correct answer and mark it on the
SCANTRON form:

1. Identify your form number (Note: if you don’t answer this question correctly you will
lose 5 points)

A. 1
B. 2
C. 3
D. 4

2. For an F distribution, the number of degrees of freedom for the denominator

A. can be larger, smaller, or equal to the number of degrees of freedom for the numerator
B. must always be larger than the number of degrees for the numerator
C. must always be smaller than the number of degrees of freedom for the numerator
D. must always be equal to the number of degrees of freedom for the numerator
E. must always be equal to the number of degrees of freedom for the numerator if used to test one
variance.

3. Consider the following plot of standardized residuals vs. predicted values of the dependent
variable from a linear regression.

Considering tis graph which of the following statements is correct.

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A. The residuals are homoscedastic.
B. The regression is misspecified.
C. There is one extreme outliers.
D. The expected value of residuals is slightly higher than zero.
E. None of the above

4. In a simple regression model the R2,

A. is the explained proportion of the variation in the explanatory variable.

B. is always more than zero.
C. can be more than one.
D. cannot be higher than the absolute value of the correlation coefficient.
E. all of the above

Questions 5 –6: A car manufacturer aims to improve the quality of the products by reducing the
defects and also increase the customer satisfaction. Therefore, he monitors the efficiency of two
assembly lines in the shop floor. In line A there are 18 defects reported out of 200 random
samples. While the line B shows 25 defects out of 600 cars.

Sample Size Number of Defects

Line A 200 16

Line B 600 25

If we are to test if there is a difference between the two assembly lines:

5. The test statistics is:

A. 1.72
B. 2.13
C. 2.39
D. 2.54
E. 2.61

6. The p-value is:

A. 0.033
B. 0.025
C. 0.022
D. 0.019
E. 0.014

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Questions 7-9: Hours spent working per week for workers are reported by students in an
employment survey. The day shift workers are compared to night shift workers. We would
like to test if there is a difference between the two groups. The data is presented in what
follows:

Front Back
n1 = 24 n2 = 25
= 32.1 = 30.3
s1 = 5 s2 = 2

7. A 99% interval estimate for the difference between the two population means is:

A. -2.32 to 5.92
B. -1.72 to 5.32
C. -1.05 to 4.05
D. -1.21 to 4.81
E. None of the above

8. The test statistic has a value of:

A. 1.64
B. 1.82
C. 2.23
D. 2.45
E. None of the above

9. The p-value for this test is closest to:

A. > 0.02 & < 0.05

B. < 0.005
C. > 0.01 & < 0.025
D. > 0.1 & < 0.2
E. > 0.2

Questions 10-11: One of the quality measures of blood glucose meter strips is the consistency of
the test results on the same sample of blood. The consistency is measured by the variance of the
readings in repeated testing. Two-meter strips (A and B) are to be tested for their consistency and
we are interested to see if there is a difference. The following random samples were taken:

Sample A Sample B
n1 = 21 n2 = 16
s1 = 1.01 s2 = 1.65

10. The test statistic is closest to:

A. 0.48
B. 0.52
C. 2.67
D. 2.47
E. 3.01

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11. The p-value for this test is closest to:

A. < 1%
B. > 10%
C. > 1% & < 2.5%
D. > 2.5% & < 5%
E. > 5% & < 10%%

12. The contents of a sample of 41 bottles of soda showed a standard deviation of 12. We are
interested in testing to determine whether the standard deviation population is more than 9.9. The
p-value for this test is closest to:

A. 10.2%
B. 12.6%
C. 6.3%
D. 2.8%
E. 5.8%

13. In a simple regression, what does SSE measure?

A. The strength of the intercept

B. The variation around the regression line.
C. The standard error of the slope
D. The variability of the dependent variable
E. The variation of the independent variable.

14. Consider the following summary statistics for a random sample:

𝑋̄ = 40; 𝑠𝑋 = 30
𝑌̄ = 80; 𝑠𝑌 = 10
𝑟𝑋𝑌 = −0.6

For which of the following the R square would be the largest?

A. Y-hat = 88 – 0.2X
B. Y-hat = 120 – X
C. Y-hat = 72 – 0.2X
D. Y-hat = 104 – 0.6X
E. None of the above

15. A study of 1,000 families gave the following results:

X = 68 : average height of husband in inches, S X = 2.7 inches;

Y = 63 : average height of wife in inches, SY = 2.5 inches;
rX ,Y = 0.25

The estimated height of a wife when her husband is 72 inches tall is:

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A. 63 inches
B. 64 inches
C. 70 inches
D. 78 inches
E. Need more information

Question 16-17: A linear regression of y (Monthly Salary in $1,000) on x (Tenure in Years) has
yielded: 𝑦̂ = 50 + 4.2𝑥

16. According to this regression, an individual with 9 year and 3 months of tenure would on
average make (approximately):

A. $91803
B. $89710
C. $89060
D. $88850
E. $84802

17. If x (Tenure) had been measured in months rather than in years, how would the regression
output change?

A. There will be no change in the slope or the intercept.

B. Both intercept and the slope will increase.
C. Both intercept and slope will decline.
D. The slope will decline while the intercept will remain constant.
E. The intercept will decline while the slope will remain constant.

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Page 15 of 22
Page 16 of 22
Page 17 of 22
 F-table ( = 2.5%)
Degrees of Freedom for Numerator (1)

(2) 1 2 3 4 5 6 7 8 9 10 12 15 20 24 30 40 60 120

2 38.5 39.0 39.2 39.2 39.3 39.3 39.4 39.4 39.4 39.4 39.4 39.4 39.4 39.5 39.5 39.5 39.5 39.5 39.5

4 12.2 10.6 9.98 9.60 9.36 9.20 9.07 8.98 8.90 8.84 8.75 8.66 8.56 8.51 8.46 8.41 8.36 8.31 8.26

6 8.81 7.26 6.60 6.23 5.99 5.82 5.70 5.60 5.52 5.46 5.37 5.27 5.17 5.12 5.07 5.01 4.96 4.90 4.85

8 7.57 6.06 5.42 5.05 4.82 4.65 4.53 4.43 4.36 4.30 4.20 4.10 4.00 3.95 3.89 3.84 3.78 3.73 3.67

10 6.94 5.46 4.83 4.47 4.24 4.07 3.95 3.85 3.78 3.72 3.62 3.52 3.42 3.37 3.31 3.26 3.20 3.14 3.08

12 6.55 5.10 4.47 4.12 3.89 3.73 3.61 3.51 3.44 3.37 3.28 3.18 3.07 3.02 2.96 2.91 2.85 2.79 2.73

14 6.30 4.86 4.24 3.89 3.66 3.50 3.38 3.29 3.21 3.15 3.05 2.95 2.84 2.79 2.73 2.67 2.61 2.55 2.49

16 6.12 4.69 4.08 3.73 3.50 3.34 3.22 3.12 3.05 2.99 2.89 2.79 2.68 2.63 2.57 2.51 2.45 2.38 2.32

18 5.98 4.56 3.95 3.61 3.38 3.22 3.10 3.01 2.93 2.87 2.77 2.67 2.56 2.50 2.44 2.38 2.32 2.26 2.19

20 5.87 4.46 3.86 3.51 3.29 3.13 3.01 2.91 2.84 2.77 2.68 2.57 2.46 2.41 2.35 2.29 2.22 2.16 2.09

22 5.79 4.38 3.78 3.44 3.22 3.05 2.93 2.84 2.76 2.70 2.60 2.50 2.39 2.33 2.27 2.21 2.14 2.08 2.00

23 5.75 4.35 3.75 3.41 3.18 3.02 2.90 2.81 2.73 2.67 2.57 2.47 2.36 2.30 2.24 2.18 2.11 2.04 1.97

24 5.72 4.32 3.72 3.38 3.15 2.99 2.87 2.78 2.70 2.64 2.54 2.44 2.33 2.27 2.21 2.15 2.08 2.01 1.94

25 5.69 4.29 3.69 3.35 3.13 2.97 2.85 2.75 2.68 2.61 2.51 2.41 2.30 2.24 2.18 2.12 2.05 1.98 1.91

26 5.66 4.27 3.67 3.33 3.10 2.94 2.82 2.73 2.65 2.59 2.49 2.39 2.28 2.22 2.16 2.09 2.03 1.95 1.88

27 5.63 4.24 3.65 3.31 3.08 2.92 2.80 2.71 2.63 2.57 2.47 2.36 2.25 2.19 2.13 2.07 2.00 1.93 1.85

28 5.61 4.22 3.63 3.29 3.06 2.90 2.78 2.69 2.61 2.55 2.45 2.34 2.23 2.17 2.11 2.05 1.98 1.91 1.83

29 5.59 4.20 3.61 3.27 3.04 2.88 2.76 2.67 2.59 2.53 2.43 2.32 2.21 2.15 2.09 2.03 1.96 1.89 1.81

30 5.57 4.18 3.59 3.25 3.03 2.87 2.75 2.65 2.57 2.51 2.41 2.31 2.20 2.14 2.07 2.01 1.94 1.87 1.79

40 5.42 4.05 3.46 3.13 2.90 2.74 2.62 2.53 2.45 2.39 2.29 2.18 2.07 2.01 1.94 1.88 1.80 1.72 1.64

60 5.29 3.93 3.34 3.01 2.79 2.63 2.51 2.41 2.33 2.27 2.17 2.06 1.94 1.88 1.82 1.74 1.67 1.58 1.48

120 5.15 3.80 3.23 2.89 2.67 2.52 2.39 2.30 2.22 2.16 2.05 1.94 1.82 1.76 1.69 1.61 1.53 1.43 1.31

5.02 3.69 3.12 2.79 2.57 2.41 2.29 2.19 2.11 2.05 1.94 1.83 1.71 1.64 1.57 1.48 1.39 1.27 1.00

Page 18 of 22
 F-table ( = 5%)
Degrees of Freedom for Numerator (1)

(2) 1 2 3 4 5 6 7 8 9 10 12 15 20 24 30 40 60 120

2 18.5 19.0 19.2 19.2 19.3 19.3 19.4 19.4 19.4 19.4 19.4 19.4 19.4 19.5 19.5 19.5 19.5 19.5 19.5

4 7.71 6.94 6.59 6.39 6.26 6.16 6.09 6.04 6.00 5.96 5.91 5.86 5.80 5.77 5.75 5.72 5.69 5.66 5.63

6 5.99 5.14 4.76 4.53 4.39 4.28 4.21 4.15 4.10 4.06 4.00 3.94 3.87 3.84 3.81 3.77 3.74 3.70 3.67

8 5.32 4.46 4.07 3.84 3.69 3.58 3.50 3.44 3.39 3.35 3.28 3.22 3.15 3.12 3.08 3.04 3.01 2.97 2.93

10 4.96 4.10 3.71 3.48 3.33 3.22 3.14 3.07 3.02 2.98 2.91 2.85 2.77 2.74 2.70 2.66 2.62 2.58 2.54

12 4.75 3.89 3.49 3.26 3.11 3.00 2.91 2.85 2.80 2.75 2.69 2.62 2.54 2.51 2.47 2.43 2.38 2.34 2.30

14 4.60 3.74 3.34 3.11 2.96 2.85 2.76 2.70 2.65 2.60 2.53 2.46 2.39 2.35 2.31 2.27 2.22 2.18 2.13

16 4.49 3.63 3.24 3.01 2.85 2.74 2.66 2.59 2.54 2.49 2.42 2.35 2.28 2.24 2.19 2.15 2.11 2.06 2.01

18 4.41 3.55 3.16 2.93 2.77 2.66 2.58 2.51 2.46 2.41 2.34 2.27 2.19 2.15 2.11 2.06 2.02 1.97 1.92

20 4.35 3.49 3.10 2.87 2.71 2.60 2.51 2.45 2.39 2.35 2.28 2.20 2.12 2.08 2.04 1.99 1.95 1.90 1.84

22 4.30 3.44 3.05 2.82 2.66 2.55 2.46 2.40 2.34 2.30 2.23 2.15 2.07 2.03 1.98 1.94 1.89 1.84 1.78

23 4.28 3.42 3.03 2.80 2.64 2.53 2.44 2.37 2.32 2.27 2.20 2.13 2.05 2.01 1.96 1.91 1.86 1.81 1.76

24 4.26 3.40 3.01 2.78 2.62 2.51 2.42 2.36 2.30 2.25 2.18 2.11 2.03 1.98 1.94 1.89 1.84 1.79 1.73

25 4.24 3.39 2.99 2.76 2.60 2.49 2.40 2.34 2.28 2.24 2.16 2.09 2.01 1.96 1.92 1.87 1.82 1.77 1.71

26 4.23 3.37 2.98 2.74 2.59 2.47 2.39 2.32 2.27 2.22 2.15 2.07 1.99 1.95 1.90 1.85 1.80 1.75 1.69

27 4.21 3.35 2.96 2.73 2.57 2.46 2.37 2.31 2.25 2.20 2.13 2.06 1.97 1.93 1.88 1.84 1.79 1.73 1.67

28 4.20 3.34 2.95 2.71 2.56 2.45 2.36 2.29 2.24 2.19 2.12 2.04 1.96 1.91 1.87 1.82 1.77 1.71 1.65

29 4.18 3.33 2.93 2.70 2.55 2.43 2.35 2.28 2.22 2.18 2.10 2.03 1.94 1.90 1.85 1.81 1.75 1.70 1.64

30 4.17 3.32 2.92 2.69 2.53 2.42 2.33 2.27 2.21 2.16 2.09 2.01 1.93 1.89 1.84 1.79 1.74 1.68 1.62

40 4.08 3.23 2.84 2.61 2.45 2.34 2.25 2.18 2.12 2.08 2.00 1.92 1.84 1.79 1.74 1.69 1.64 1.58 1.51

60 4.00 3.15 2.76 2.53 2.37 2.25 2.17 2.10 2.04 1.99 1.92 1.84 1.75 1.70 1.65 1.59 1.53 1.47 1.39

120 3.92 3.07 2.68 2.45 2.29 2.18 2.09 2.02 1.96 1.91 1.83 1.75 1.66 1.61 1.55 1.50 1.43 1.35 1.25

3.84 3.00 2.60 2.37 2.21 2.10 2.01 1.94 1.88 1.83 1.75 1.67 1.57 1.52 1.46 1.39 1.32 1.22 1.00

Page 19 of 22
 Formula sheet

Inference about (μ 1 – μ 2) when  12 =  22:

( X 1 − X 2 ) − ( 1 −  2 )
Test statistic: t= where
sP2 sP2
+
n1 n2
(n1 − 1) s12 + (n2 − 1) s22
s P2 =
n1 + n2 − 2
sP2 sP2
CI estimator: ( X 1 − X 2 )  t / 2 + DF = n1 + n2 − 2
n1 n2
Inference about (μ 1 – μ 2) when  12 ≠  22:

( X 1 − X 2 ) − ( 1 −  2 )
Test statistic: t= CI estimator:
s12 s22
+
n1 n2
DF =
(s 2
1 n1 + s 22 n2 )
2

( X 1 − X 2 )  t / 2
s12 s22
+ (s2
1 n1
+
) (
2
s 22 n2 )
2

n1 n2 n1 − 1 n2 − 1

Inference about p1 – p2:

Test statistic:
z=
( pˆ1 − pˆ 2 ) − ( p1 − p2 )
[H0: (p1 – p2) = 0]
1 1
pˆ (1 − pˆ ) + 
 n1 n2 

pˆ1 (1 − pˆ1 ) pˆ 2 (1 − pˆ 2 )
CI estimator: ( pˆ1 − pˆ 2 )  z / 2 +
n1 n2

Inference about 𝝈𝟐 :
Test statistics:
(𝒏−𝟏)𝒔𝟐
[H0: 𝝈𝟐 = 𝝈𝟐𝟎 ] 𝝌𝟐𝒏−𝟏 = 𝝈𝟐

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 (𝒏−𝟏)𝑺𝟐 (𝒏−𝟏)𝑺𝟐
CI estimator: < 𝝈𝟐 <
𝝌𝟐𝜶/𝟐 𝝌𝟐 𝜶
(𝟏− )
𝟐

𝝈𝟐
Inference about 𝟏⁄ 𝟐 :
𝝈𝟐
Test statistics:

𝑺𝟐
[H0: 𝝈𝟐𝟏 = 𝝈𝟐𝟐 ] 𝑭𝒏𝟏 −𝟏,𝒏𝟐−𝟏 = 𝑺𝟏𝟐
𝟐

Simple Linear Regression

Shortcuts:

 (x −X)
n
2
1 n 
1 n 2 
ii
i
s2 = i =1
=  xi − nX 2  s XY = x y − n XY
n −1 
n − 1  i =1  n − 1  i =1 

SIMPLE REGRESSION: yi =  + xi +  i
S xy
Least squares line / linear regression line: yˆ = a + bx b= a = y − bx
s x2

Standard error of estimate: Standard error of least squares slope

estimate:
SSE SSE s
s= s2 = sb =
n−2 n−2 (n − 1) s x2
Test statistic & confidence interval estimator for β:
b−
t= b  t / 2 sb DF = n − 2
sb
Prediction Interval for y for a given value of x (xg): Confidence Interval for expected
value of y given x (xg):

1 ( xg − X ) 1 ( xg − X )
2 2
yˆ  t / 2 s 1 + + yˆ  t / 2 s +
n (n − 1) s x2 n (n − 1) s x2

n n n n
SST =  ( yi − y ) 2 SSR =  ( yˆ i − y ) 2 SSE =  ei2 =  ( yˆi − yi ) 2
i =1 i =1 i =1 i =1

SST = SSR + SSE

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 SSR SSE
Coefficient of Determination: R2 = R2 = 1 −
SST SST
SSE
R2 = 1 − n
 ( yi − y ) 2
i =1

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