Questions

Q3.1 Is the mean or the median more likely to provide a better measure of the typical profit level for corporations?

Q3.2 What important advantage do the variance and standard deviation have over the range measure of dispersion?

Q3.3 When dispersion in dollars of total cost is being analyzed, in what units are the variance and standard deviation measured?

Q3.4 If a regression model estimate of total monthly profits is $50,000 with a standard error of the estimate of $25,000, what is the chance of an actual loss?

Q3.5 A simple regression TC = a + bQ is unable to explain 19% of the variation in total costs. What is the coefficient of correlation between TC and Q?

Q3.6 In a regression-based estimate of a demand function, the b coefficient for advertising equals 3.75 with a standard deviation of 1.25 units. What is the range within which there can be 99% confidence that the actual parameter for advertising can be found?

Q3.7 Describe the benefits and risks entailed with an experimental approach to regression analysis.

Q3.8 Describe a circumstance in which a situation of very high correlation between two independent variables, called multicollinearity, is likely to be a problem, and discuss a possible remedy.

Q3.9 When residual or error terms are related over time, serial correlation is said to exist. Is serial correlation apt to be a problem in a time-series analysis of quarterly sales data over a 10-year period? Identify a possible remedy, if necessary.

Q3.10 Managers often study the profit margin-sales relation over the life cycle of individual products, rather than the more direct profit-sales relation. In addition to the economic reasons for doing so, are there statistical advantages as well? (Note: Profit margin equals profit divided by sales.)

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