Problem 1: When asked to write a regression model, a few past students have written the model as follows:
Explain what is wrong with this formulation.
Problem 2: Consider the regression model: 
where E is the starting salary (in dollars) of a new employee of a firm and N is the number of years of college attended. There are 50 new employees.
a. What are the intuitive/economic interpretations of β0 and β1 ?
b. What are the properties of the least squares estimators (β0 and β1) ?
c. Suppose E is measured in hundreds of dollars. Describe the effect of this change in units on the estimated regression coefficients and their standard errors, t and F-statistics, p-values, and the value of R2.