Answer all questions. This exam should be done independently and individually, without help from classmates or anyone else. This component of the midterm exam will count for a total of 50

points. Please show your work and justify your answers as appropriate. In this problem, you will analyze medical expenditures of individuals 65 years and older who qualify for health care under the U.S. Medicare program. The original data source is the Medical Expenditure Panel Survey for year 2008. You will use Stata data in file mpel.dta. The file contains 3064 observations on 10 variables. The basic equation you will estimate can be written as