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Candidates may complete the front cover of their answer book and sign their desk card but
must NOT write anything else until the start of the examination period is announced
Answer ONE question from Section A and ONE question from Section B
ONLY silent, self-contained calculators with a Single-Line Display or Dual-Line Display are
permitted in this examination.
Dictionaries are not allowed with one exception. Those whose first language is not English
may use a standard translation dictionary to translate between that language and English
provided that neither language is the subject of this examination. Subject specific translation
dictionaries are not permitted.
No electronic devices capable of storing and retrieving text, including electronic dictionaries,
may be used.
INFORMATION FOR INVIGILATORS: The exam papers are to be collected at the end of
the exam.
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SECTION A
Answer One Question from Section A
1.)
a) State and discuss a research question relevant to business practices which is
suitable for quantitative analysis. (20 Marks)
b) State the type of data you would collect and describe how you would undertake the
data collection. Comment on the problems you anticipate in data collection and the
strategies you would employ to overcome these problems. (20 Marks)
c) What quantitative methods would you use in your analysis? Comment on how your
chosen methods would help to answer your research question. (20 Marks)
d) What conditions do your data have to satisfy for your results to be valid? How might
the failure to satisfy these conditions affect your conclusion? (20 Marks)
2.) A consultancy company reports that the average profits per worker (profitability) for firms
in the construction industry are over £16,000. A sample of 250 firms shows that the
average level of profitability was £15,400, with a standard deviation of £2,200.
a) What is the probability that the profitability of a randomly sampled firm is less than
£16,000 (you can assume a normal distribution)? (20 Marks)
b) Calculate the 90% confidence interval of the average profitability for all firms. Does it
suggest that the claim ‘the average is £16,000’ is correct? (20 Marks)
d) Would the conclusion be different if you use a 10% significance level? (10 Marks)
e) Explain what Type I and Type II Errors are, and discuss their relevance in deciding on
the level of significance in hypothesis testing. (20 Marks)
f) Why might the normality assumption of the distribution of profits not be correct?
Which measure, other than the arithmetic mean, could be a good indicator of the
typical profitability of a firm? (10 Marks)
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SECTION B
Answer One question from Section B
3.) An economist wants to analyse the productivity of manufacturing firms. For this purpose,
he runs a regression that includes the following variables:
ln_productivity, defined as the logarithm of value added per worker in millions of GBP
RD, defined as the value of research and development (R&D) expenditures in millions
of pounds
D_import, a dummy variable which equals 1 if the company imports production inputs
and 0 otherwise.
b) Evaluate the overall fit of the model. What could be done to improve the model’s
fit? (20 Marks)
Turn over
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c) Suppose you want to test the hypothesis that the elasticity of productivity with
respect to capital is higher for importers. Explain carefully how this hypothesis can
be tested using regression analysis. (25 Marks)
d) How would you test for a non-linear relationship between R&D and productivity?
How can you find the level of R&D that maximizes expected productivity?
(15 marks)
4.)
a) Which are the main underlying assumptions of a factor analysis? Discuss the main
limitations of factor analysis? (20 marks)
b) Discuss the main assumptions underlying ordinary least squares (OLS) regression.
(40 Marks)
End
N14B27-E1