(Answered) Q2 Interpreting your model5 PointsConsider the population regression model absenteesim…

Q2 Interpreting your model — 5 Points
Consider the population regression model absenteeism
i
= β0 + β1 ln(pollution
i
) + ε
i
and the associated sample regression model absenteeism
i
= b0 + b1 ln(pollution
i
) + e
i
, where i denotes school i, absenteeism
i
is the annual rate of chronic absenteeism in school i, pollution
i
is school i μg/m3. b0 and b1 are determined using the ordinary least squares (OLS) criteria.
Note: for the following questions, you must select all correct answers to receive credit. That is, no partial marks will be provided.
Q2.1 0.5 Points
Which of the following statements correctly explains the difference between the errors ε
i
and e
i
? Select all that apply.
There is no difference if CR1 is satisfied.
ε
i
is always smaller than e
i
.
ε
i
is always larger than e
i
.
ε
i
only comes from prediction error while e
i
only comes from sampling error.
None of the statements are correct.