Use the data in APPLE for this exercise. These are telephone survey data attempting to elicit the demand for a (fictional) “ecologically friendly” apple. Each family was (randomly) presented with a set of prices for regular apples and the ecolabeled apples. They were asked how many pounds of each kind of apple they would buy.

(i) Of the 660 families in the sample, how many report wanting none of the ecolabeled apples at the set price?

(ii) Does the variable ecolbs seem to have a continuous distribution over strictly positive values?

What implications does your answer have for the suitability of a Tobit model for ecolbs?

(iii) Estimate a Tobit model for ecolbs with ecoprc, regprc, faminc, and hhsize as explanatory variables. Which variables are significant at the 1% level?

(iv) Are faminc and hhsize jointly significant?

(v) Are the signs of the coefficients on the price variables from part (iii) what you expect? Explain.

(vi) Let b1 be the coefficient on ecoprc and let b2 be the coefficient on regprc. Test the hypothesis H0: 2b1 5 b2 against the two-sided alternative. Report the p-value of the test. (You might want to refer to Section 4-4 if your regression package does not easily compute such tests.)

(vii) Obtain the estimates of E1ecolbs0x2 for all observations in the sample. [See equation (17.25).]

Call these ecolbsi

. What are the smallest and largest fitted values?