A Study of the Top MBA Programs Attempted to Predict $95 \%$

question 123

Multiple Choice

A study of the top MBA programs attempted to predict the average starting salary (in $1000ʹs) of graduates of the program based on the amount of tuition (in $1000ʹs) charged by the program and
The average GMAT score of the programʹs students. The results of a regression analysis based on a
Sample of 75 MBA programs is shown below: Least Squares Linear Regression of Salary
Predictor


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 $\mathrm { E } ( \mathrm { Y } )$ : $( \$ 126,610 , \$ 136,640 )$
$95 \%$ 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 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 \(\$ 136,640\).
• 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 \(\$ 90,113\) and \(\$ 173,16,30\).
• C) 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 \(\$ 173,16,30\).
• 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 \(\$ 126,610\) and \(\$ 136,640\).

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Definitions:

Marginal Cost

The increase in total production costs resulting from the production of one additional unit of a product or service.

Downstream Division

Part of a company involved in the final processing, distribution, or selling of a product.

Intermediate Good

A product used in the manufacturing process to produce a final good or finished product, not sold directly to consumers.

Transfer Price

The price at which goods or services are sold between departments within the same organization or between affiliated companies.