Recall figure 15.1. Use the parameter values on which that figure is based. Assume that i is

Recall figure 15.1. Use the parameter values on which that figure is based.

Assume that εi is normally distributed with E(εi) = 0 and V(εi) = 36,000,000.

(a) What is the probability that εi is greater than 6,000? What, then, is the probability that P(yi > 50,000)?

(b) What is E(yi) if years of schooling is 18? What must be true of the value of εi if income is to exceed $50,000 for an individual with 18 years of schooling?

(c) If years of schooling is 18, what is P(yi > 50,000)?