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    Hypothesis tests in STATA

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    1. The file cocaine.dta contains 56 observations on variables related to
    sales of cocaine powder in northeastern California over the period 1984-
    1991. The variables are
    price = price per gram in dollars for a cocaine sale
    quant = number of grams of cocaine in a given sale
    qual = quality of the cocaine expressed as percentage purity
    trend = a time variable with 1984 =1 up to 1991 =8.
    Consider the regression model
    price = B1 + B2quant + B3qual + B4trend + e (1)

    (a) What proportion of variation in cocaine price is explained by variation
    in quantity, quality, and time?

    (b) It is claimed that the greater the number of sales, the higher the
    risk of getting caught; and thus, sellers are willing to accept a
    lower price if they can make sales in larger quantities. Set up H0
    and H1 that would be appropriate to test this hypothesis. Carry
    out the hypothesis test.

    (c) Test the hypothesis that the quality of cocaine has no influence
    on price against the alternative that a premium is paid for better
    quality cocaine.

    (d) What is the average annual change in the cocaine price? Can you
    suggest why price might be changing in this direction?

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    https://brainmass.com/economics/econometric-models/hypothesis-tests-in-stata-56759

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    1. The file cocaine.dta contains 56 observations on variables related to sales of cocaine powder in northeastern California over the period 1984- 1991. The variables are
    price = price per gram in dollars for a cocaine sale
    quant = number of grams of cocaine in a given sale
    qual = quality of the cocaine expressed as percentage purity
    trend = a time variable with 1984 =1 up to 1991 =8.
    Consider the regression model
    price = B1 + B2quant + B3qual + B4trend + e (1)

    (a) What proportion of variation in cocaine price is explained by variation in quantity, quality, and time?
    use STATA commend: regress price quant qual trend
    we get the following ...

    Solution Summary

    Hypothesis tests in STATA are examined.

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