A Study Has Recently Been Conducted by a Major Computer

question 117

Multiple Choice

A study has recently been conducted by a major computer magazine publisher in which the objective was to develop a multiple regression model to explain the variation in price of personal computers. Three quantitative independent variables were used along with one qualitative variable. The qualitative variable was coded 1 if the computer included a monitor, 0 otherwise. The following computer printout shows the final output. Based on this information, and with a 0.05 level of significance, which of the following conclusions can be justified?

• A) Knowing whether the computer comes with a monitor or not is a significant factor in explaining the variation in price of the computer.
• B) There are substantial multicollinearity effects in this regression model.
• C) The only significant variable in the model at the .05 level of significance is Hard Drive Capacity.
• D) Removing the Monitor dummy variable would reduce the standard error of the estimate considerably.

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Definitions:

Price Elasticity

The estimation of demand's reaction to the alteration of a good's price.

Midpoint Formula

A method used in geometry to find the midpoint of a line segment between two points by averaging the x and y coordinates.

Demand

The consumer's willingness and ability to purchase goods or services at various price points at a given time.

Parallel Demand Curves

Graphical representations of the demand for two or more goods that do not intersect, indicating no direct substitution effect between them.