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Multiple Choice questions on least squares estimation

Answer this question (question 17) and questions 18 and 19 on the basis of the following regression results, standard errors in parentheses, n = 200)

Qd = -500 - 100Pa + 50Pb + .3I + .2A
(250) (50) (30) (.1) (.08)

R2 = .12
Where Qd = 10,500 quantity demanded of product "A"
Pa = $10, price of product "A"
Pb = $8, price of product "B"
I = $12,000 per capita income
A = $20,000 monthly advertising expenditure

1. Which of the Variables does NOT pass the t-test at the .05 level of significance?

a. Pa
b. Pb
c. A
d. I
e. All the variables pass the t-test

2. As a researcher, which aspect of the results would be of greatest concern?

a. The negative value of the constant (i.e., -500)
b. The relatively low impact of the competitor's price
c. The fact that not all of the variables are statistically significant
d. The poor fit of the regression line

3. As the manager of Product A, which of the following would be of greatest concern (based on the regression results above)?

a. None of the factors below would be of concern.
b. An impending recession.
c. Pressure on you by your salespersons to lower the price so that they can boost their sales.
d. A price reduction by the makers of product B.

4. Among the advantages of the least-squares trend analysis techniques is

a. The ease of calculation.
b. Relatively little analytical skill required.
c. Its ability to provide information regarding the statistical significance of the results.
d. All of the above

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Solution Summary

The solution gives answers to multiple choice questions on least squares estimation. The questions are related to regression equation, Student's t-test, least squares estimation, slope, intercept, correlation, residual, R square, coefficient of determination and regression coefficients.

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