Instruction 14-5
a Contractor Developed a Multiplicative Time-Series Model to Forecast

question 87

Multiple Choice

Instruction 14-5
A contractor developed a multiplicative time-series model to forecast the number of contracts in future quarters, using quarterly data on number of contracts during the three-year period from 2008 to 2010. The following is the resulting regression equation:
$$\log _ { 10 } \hat { Y } = 3.37 + 0.117 X - 0.083 Q _ { 1 } + 1.28 Q _ { 2 } + 0.617 Q _ { 3 }$$
Where
$\hat { Y }$ is the estimated number of contracts in a quarter.
$X$ is the coded quarterly value with $X = 0$ in the first quarter of 2008 .
$Q _ { 1 }$ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
$Q _ { 2 }$ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
$Q _ { 3 }$ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Instruction 14-5,to obtain a forecast for the fourth quarter of 2011 using the model,which of the following sets of values should be used in the regression equation?

• A) X = 15, Q₁ = 1, Q₂ = 0, Q₃ = 0
• B) X = 16, Q₁ = 0, Q₂ = 0, Q₃ = 0
• C) X = 16, Q₁ = 1, Q₂ = 0, Q₃ = 0
• D) X = 15, Q₁ = 0, Q₂ = 0, Q₃ = 0

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Definitions:

Market Output

The total quantity of goods or services produced and offered for sale by firms in a particular market.

Fair Return

A reasonable profit level that a utility or service provider is allowed to earn, taking into account the need to provide goods or services at fair prices.

Economic Profit

The contrast between total financial gain and overall financial obligations, including both explicit and implicit expenditures.

Marginal Cost

The financial burden of producing a further unit of a product or service.