A Manager Uses Regression to Express Sales as a Function

question 81

Multiple Choice

A manager uses regression to express sales as a function of advertising expenditures (X1) , and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:
Y = 10 + 0.51X1 + 0.45X2
The coefficient of determination is 0.96
Determine which of the following conclusions is valid regarding the coefficient of determination:

• A) More analysis is needed. The coefficient of determination leaves much unexplained.
• B) The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.
• C) The coefficient of determination is positive because the constant term is positive.
• D) The coefficient of determination should always be greater than one.

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Definitions:

Average Cost

The total cost of production divided by the number of units produced, often used to calculate the cost per unit.

Total Surplus

The overall net benefit to society, calculated as the sum of consumer surplus (benefits to consumers) and producer surplus (benefits to producers) from a transaction.

Monopolist

An entity that is the sole provider of a particular good or service in a market, often characterized by their ability to influence pricing and availability.

Marginal Cost

The incremental expense incurred when a business produces another item of its product line.