Consider the following two models relating wages and education: Model 1 wage Bo + Bieduc + B2 educ² + u where and R2 -0.393 R2 0.048 Model 2 log (wage) Bo + Bieduc + B2 educ² + u where R2=0.432 -0.009 R²
Consider the following two models relating wages and education: Model 1 wage Bo + Bieduc + B2 educ² + u where and R2 -0.393 R2 0.048 Model 2 log (wage) Bo + Bieduc + B2 educ² + u where R2=0.432 -0.009 R²
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Based on the R² and R², which model is the better fit?
O Both models explain the same amount of variation in the dependent variable.
O Model 2 is the best fit.
You cannot use the R-squared and adjusted R-squared to make this determination in this situation.
O Model 1 is the best fit.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F083c19ae-9d1a-47ed-91da-cee094dde7d9%2Ff1a117ab-6e52-464a-83df-294e13993603%2Fs9hw6tg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Based on the R² and R², which model is the better fit?
O Both models explain the same amount of variation in the dependent variable.
O Model 2 is the best fit.
You cannot use the R-squared and adjusted R-squared to make this determination in this situation.
O Model 1 is the best fit.
![8. Using adjusted R-squared to choose between nonnested models
Consider the following two models relating wages and education:
Model 1
wage = Bo + Bieduc + B2 educ² + u
where
and
R² = 0.393
R2 = 0.048
Model 2
log (wage) Bo + Bieduc + B2 educ² + u
where
R2 = 0.432
R²= 0.009](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F083c19ae-9d1a-47ed-91da-cee094dde7d9%2Ff1a117ab-6e52-464a-83df-294e13993603%2Fjggsem_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8. Using adjusted R-squared to choose between nonnested models
Consider the following two models relating wages and education:
Model 1
wage = Bo + Bieduc + B2 educ² + u
where
and
R² = 0.393
R2 = 0.048
Model 2
log (wage) Bo + Bieduc + B2 educ² + u
where
R2 = 0.432
R²= 0.009
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education