Question: 11.8 Consider the linear probability model Yi = b0 + b1Xi + ui, and assume that E1ui Xi2 = 0. a. Show that Pr1Yi =

11.8 Consider the linear probability model Yi = b0 + b1Xi + ui, and assume that E1ui Xi2 = 0.

a. Show that Pr1Yi = 1 Xi2 = b0 + b1Xi.

b. Show that var1ui Xi2 = 1b0 + b1Xi231 - 1b0 + b1Xi24. [Hint: Review Equation (2.7).]

c. Is ui heteroskedastic? Explain.

d. (Requires Section 11.3) Derive the likelihood function.

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