A Study of the Top MBA Programs Attempted to Predict

question 56

Multiple Choice

A study of the top MBA programs attempted to predict the average starting salary (in $1000's) of graduates of the program based on the amount of tuition (in $1000's) charged by the program and the average GMAT score of the program's students. The results of a regression analysis based on a sample of 75 MBA programs is shown below:
$$\begin{array}{l}\text { Least Squares Linear Regression of Salary }\\\begin{array} { l c c c c c c c c } \text { Predictor } & & & & & & & \\\text { Variables } & \text { Coefficient } &{ \text { Std Error } } & \text { T } & & \text { P } & \multicolumn{2}{c} { \text { VIF } } \\\text { Constant } & - 203.402 & 51.6573 & - 3.94 & & 0.0002 & 0.0 \\\text { Gmat } & 0.39412 & 0.09039 & 4.36 & & 0.0000 & 2.0 & \\\text { Tuition } & 0.92012 & 0.17875 & 5.15 & & 0.0000 & 2.0 &\end{array}\end{array}$$ The model was then used to create 95% confidence and prediction intervals for y and for E(Y) when the tuition charged by the MBA program was $75,000 and the GMAT score was 675. The results are shown here:

95% confidence interval for E(Y) : ($126,610, $136,640)
95% prediction interval for Y: ($90,113, $173,160)

Which of the following interpretations is correct if you want to use the model to estimate Y for a single MBA program?

• A) We are 95% confident that the average of all starting salaries for graduates of all MBA programs that charge $75,000 in tuition and have an average GMAT score of 675 will fall
• Between $126,610 and $136,640.
• B) We are 95% confident that the average starting salary for graduates of a single MBA program that charges $75,000 in tuition and has an average GMAT score of 675 will fall between
• $126,610 and $136,640.
• C) We are 95% confident that the average starting salary for graduates of a single MBA program that charges $75,000 in tuition and has an average GMAT score of 675 will fall between
• $90,113 and $173,16,30.
• D) We are 95% confident that the average of all starting salaries for graduates of all MBA programs that charge $75,000 in tuition and have an average GMAT score of 675 will fall
• Between $90,113 and $173,16,30.

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Definitions:

Evidence-Based Management

The practice of making managerial decisions and organizational policies based on the best available evidence from scientific research and business data.

Management

The act of overseeing and coordinating tasks and processes in an organization to ensure efficient and effective operations towards achieving specific objectives.

Scientific Evidence

Information that serves to either support or counter a scientific theory or hypothesis, gathered through empirical observation and documentation.

Contingencies

Situations or conditions that are dependent on other events which may or may not happen, often influencing decision-making and planning.