Instruction 13-5
a Microeconomist Wants to Determine How Corporate Sales $\mathrm { R }$

question 77

Multiple Choice

Instruction 13-5
A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies.She proceeds to randomly select 26 large corporations and record information in millions of dollars.The Microsoft Excel output below shows results of this multiple regression.
SUMMARY
Regression Statistics
\begin{tabular} { l r } Multiple $\mathrm { R }$ & $0.830$ \\ \hline Square & $0.689$ \end{tabular}
R Square $\quad 0.689$
Adj. R Square $\quad 0.662$
Std. Error $\quad 17501.643$
Observations 26
ANOVA
$\begin{array} { l l l l l l } & \boldsymbol { d f } & \text { SS } & \text { MS } & \boldsymbol { F } & \text { Siguif } \boldsymbol { F } \\ \text { Regression } & 2 & 15579777040 & 7789888520 & 25.432 & 0.0001 \\ \text { Residual } & 23 & 7045072780 & 306307512 & & \\ \text { Total } & 25 & 22624849820 & & & \end{array}$
$\begin{array} { l l l l l } & \text { Coeff } & \text { StdError } & \boldsymbol { t } \text { Stat } & \boldsymbol { P } \text {-value } \\ \text { Intercept } & 15800.0000 & 6038.2999 & 2.617 & 0.0154 \\ \text { Capital } & 0.1245 & 0.2045 & 0.609 & 0.5485 \\ \text { Wages } & 7.0762 & 1.4729 & 4.804 & 0.0001 \end{array}$ Note: Adj.R Square = Adjusted R Square;Std.Error = Standard Error
-Referring to Instruction 13-5,at the 0.01 level of significance,what conclusion should the microeconomist draw regarding the inclusion of Capital in the regression model?

• A)Capital is not significant in explaining corporate sales and should not be included in the model because its p-value is more than 0.01.
• B)Capital is not significant in explaining corporate sales and should not be included in the model because its p-value is less than 0.01.
• C)Capital is significant in explaining corporate sales and should be included in the model because its p-value is more than 0.01.
• D)Capital is significant in explaining corporate sales and should be included in the model because its p-value is less than 0.01.

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Definitions:

Negatively Correlated

Refers to two variables which move in opposite directions; when one variable increases, the other decreases, and vice versa.

Variables

Elements, features, or factors that are likely to vary or change and can be measured, controlled, or manipulated in experiments or models.

Opposite Directions

Refers to two lines or paths that diverge from each other, heading in completely different trajectories.

Positive Correlation

A relationship between two variables where if one variable increases, the other one also increases or if one decreases, the other also decreases.