1. In a regression analysis, a residual is defined as:
a) The difference between the actual value and the predicted value of the dependent variable.
b) The difference between the actual value and the predicted value of the independent variable.
c) ?The proportion of the variation in the independent variable that remains unexplained by the variation in the dependent variable.
d) The proportion of the variation in the dependent variable that remains unexplained by the variation in the independent variable.
2. When comparing two regression analyses that have a different number of independent variables, which of the following should be used to compare the explanatory power of the two regressions?
a) Adjusted R-squared.
b) ?R-squared.
c) ?The correlation coefficient ("Multiple R").
d) None of the above.
3. Amalgamated Fruits, Vegetables, and Legumes, an agricultural company, breeds the experimental fruit "kiwana." The company is studying the effects of a new fertilizer on the number of kiwanas per bunch grown on kiwana trees. The regression analysis below relates the number of kiwanas per bunch to the independent dummy variable "fertilizer." ??Based on the regression, which of the following statements may be concluded?
a) On average, the use of the new fertilizer increases the number of kiwanas per bunch by 5.25.
b) ?The independent dummy variable "fertilizer" is significant at the 0.01 level.
c) Variation in the independent dummy variable "fertilizer" explains around 53% of the variation in the number of kiwanas per bunch.
d) None of the above.
4. In a regression analysis with multiple independent variables, multicollinearity can be caused by:
a) ?A strong linear relationship between two or more independent variables.
b) ?A strong nonlinear relationship between the dependent variable and one or more independent variables.
c) ?A strong heteroskedastic relationship between the dependent variable and one or more independent variables.
d) ?None of the above.
5. Market researcher Ally Nathan is studying the relationships among price, type (classical or steel string), and consumer demand for acoustic guitars. She wants to find the relationship between demand and price, controlling for type.??To determine this relationship, she should:
a) Run a simple regression of the dependent variable demand on the independent variable price and observe the coefficient on price.
b) ?Run a simple regression of the dependent variable demand on the independent variable type and observe the coefficient on type.
c) ?Run a multiple regression of the dependent variable demand on the independent variables price and type and observe the coefficient on price.
d) Run a multiple regression of the dependent variable demand on the independent variables price and type and observe the coefficient on type.
6. The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.
What is the probability that a randomly selected CD has a content error?
a) 1.00%
b) ?0.98%
c) ?0.02%
d) None of the above.
7. The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.
What is the conditional probability that a CD has no content errors, given that has a labeling error?
a) ?97.02%
b) ?1.98%
c) 98.00%
d) None of the above.
8. The table below displays data on defect rates at a compact disk (CD) pressing facility. The table includes data on the distribution of CDs that have content errors (missing and/or wrong content), and on the distribution of CDs that have labeling errors.
Which of the following statements is true?
a) ?The fact that a CD has a content error tells us nothing about whether it has a labeling error.
b) ?The events of a CD having a content error and a CD having a labeling error are statistically dependent.
c) ?The fact that a CD has a labeling error tells us something about whether it has a content error.
d) None of the above.
9. The WH meat-packing company must decide whether or not to recall one week's production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision. ??What is the expected monetary value of the cost of not issuing a recall?
a) ?$80,000
b) $120,000
c) $800,000
d) ?$0
10. The WH meat-packing company must decide whether or not to recall one week's production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision. ??The EMV of the cost of not issuing a recall is $80,000. Based on EMV, WH should not issue a recall. If WH chooses to recall, which of the following best describes the WH's attitude towards this decision?
a) ?Risk averse.
b) Risk neutral.
c) Risk seeking
d) Chicken.
11. The WH meat-packing company must decide whether or not to recall one week's production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision. ??The EMV of the cost of not issuing a recall is $80,000. Based on EMV, WH should not issue a recall. An estimated value of a reputation loss is included in the outcome estimate of the lawsuit. If WH is implicated, the firm may face a reputation loss even if no lawsuit is filed. For what values of that reputation loss would issuing the recall be preferable, in terms of EMV?
a) Higher than $500,000.
b) ?Lower than $500,000.
c) ?Lower than $44,444
d) None of the above
12. The WH meat-packing company must decide whether or not to recall one week's production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision. ??The EMV of the cost of not issuing a recall is $80,000. Based on EMV, the manager should not issue the recall. For what values of p = Prob[WH is implicated] is not recalling the kielbasa preferable to recalling the kielbasa, in terms of EMV?
a) p < 15%
b) ?p > 15%
c) ?p < 85%
d) ?None of the above.
13. The WH meat-packing company must decide whether or not to recall one week's production of kielbasa due to possible contamination. An outbreak of non-fatal food poisoning may be linked to WH. If so, WH may face a lawsuit. The tree below summarizes the decision.
The EMV of the cost of not issuing a recall is $80,000. Suppose there were a way to know for certain whether WH would be implicated or not. What would be the value of this perfect information?
a) $68,000
b) $12,000
c) ?$80,000
d) None of the above.