Instruction 14-4
a Contractor Developed a Multiplicative Time-Series Model to Forecast

question 96

Multiple Choice

Instruction 14-4
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 3-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.
Q₁ is a dummy variable equal to 1 in the first quarter of a year and 0 otherwise.
Q₂ is a dummy variable equal to 1 in the second quarter of a year and 0 otherwise.
Q₃ is a dummy variable equal to 1 in the third quarter of a year and 0 otherwise.
-Referring to Instruction 14-4,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:

Marginal Revenue Curve

A graphical representation showing how the revenue from selling one more unit of a good or service changes as production volume changes.

Price-searcher Firm

A company that has the ability to set the price for its products because it does not face perfect competition.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of product.

Profit-maximizing Output

The level of production at which a company achieves the highest possible profit.