1. Suppose a random sample of 4 pharmaceutical firms had the following profits a
ID: 3201143 • Letter: 1
Question
1. Suppose a random sample of 4 pharmaceutical firms had the following profits and research expenditures:
Profit (P) (thousands of dollars)
Research Expenditure (R) (thousands of dollars)
50
40
60
40
40
30
50
50
Fit a regression line of the two variables. Carefully define the regression equation.
Assuming 5% level of significance, do you think the research expenditure holds the explanatory power on a firm’s profit?
How well does this regression model explain research generates profits for pharmaceutical firms?
2. Suppose you are interested in estimating the effect of hours spent in preparing an exam and exam score. You specify the following simple regression model:
Profit (P) (thousands of dollars)
Research Expenditure (R) (thousands of dollars)
50
40
60
40
40
30
50
50
Explanation / Answer
Since p - value of the slope is 0.5, we fail to reject the null hypothesis
Slope at 95% confidence level is insignificant.
So research expenditure does not holds the explanatory power on a firm’s profit
SUMMARY OUTPUT Regression Statistics Multiple R 0.5 R Square 0.25 Adjusted R Square -0.125 Standard Error 8.660254 Observations 4 ANOVA df SS MS F Significance F Regression 1 50 50 0.666667 0.5 Residual 2 150 75 Total 3 200 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 30 24.87469 1.206045 0.351114 -77.0271 137.0271 -77.0271 137.0271 Expenditure 0.5 0.612372 0.816497 0.5 -2.13483 3.134826 -2.13483 3.134826Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.