Name: _____________________________________ Roll #:____________________

𝑸𝒖𝒊𝒛 𝟒 - 𝑰𝒏𝒕𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝒕𝒐 𝑴𝒂𝒏𝒂𝒈𝒆𝒎𝒆𝒏𝒕 𝑺𝒄𝒊𝒆𝒏𝒄𝒆

1. An inverse relationship between an independent variable x and a dependent variably y means that as x
increases, y decreases, and vice versa.

ANS: T

2. A direct relationship between an independent variable x and a dependent variably y means that the
variables x and y increase or decrease together.

ANS: T

3. Another name for the residual term in a regression equation is random error.

ANS: T

4. A simple linear regression equation is given by . The point estimate of y when x = 4 is

20.45.

ANS: T

5. The vertical spread of the data points about the regression line is measured by the y-intercept.

ANS: F

6. The method of least squares requires that the sum of the squared deviations between actual y values in
the scatter diagram and y values predicted by the regression line be minimized.

ANS: T

7. A regression analysis between sales (in $) and advertising (in $) resulted in the following least squares
line: . This implies that an increase of $1 in advertising is associated with an increase of
$60 in sales.

ANS: F

8. A regression analysis between weight (y in pounds) and height (x in inches) resulted in the following
least squares line: . This implies that if the height is increased by 1 inch, the weight is
expected to increase by an average of 6 pounds.

ANS: T

9. The residual ri is defined as the difference between the actual value yi and the estimated value .

ANS: T

10. A regression analysis between sales (in $1000) and advertising (in $100) resulted in the following
least squares line: . This implies that if advertising is $600, then the predicted amount of
sales (in dollars) is $125,000.

ANS: T
 Name: _____________________________________ Roll #:____________________

11. The residuals are observations of the error variable . Consequently, the minimized sum of squared
deviations is called the sum of squares for error, denoted SSE.

ANS: T

12. Statisticians have shown that sample y-intercept b0 and sample slope coefficient b1 are unbiased
estimators of the population regression parameters 0 and 1, respectively.

ANS: T

13. The first-order linear model is sometimes called the simple linear regression model.

ANS: T

14. To create a deterministic model, we start with a probabilistic model that approximates the relationship
we want to model.

ANS: F

15. Data that exhibit an autocorrelation effect violate the regression assumption of independence.

ANS: T

16. We standardize residuals by subtracting their mean and dividing by their variance.

ANS: F

17. An outlier is an observation that is unusually small or unusually large.

ANS: T

18. We check for normality by drawing a pie chart of the residuals.

ANS: F

19. The spread in the residuals should increase as the predicted value of y increases.

ANS: F

20. The plot of residuals vs. predicted values should show no patterns if the conditions of a regression
analysis are met.

ANS: T

21. If the plot of the residuals vs. the predicted values resembles a straight line with non-zero slope, then
the regression line fits well.

ANS: F

22. In multiple regression analysis, the adjusted coefficient of determination is adjusted for the number of
independent variables and the sample size.

ANS: T
 Name: _____________________________________ Roll #:____________________

23. Most statistical software print a second R2 statistic, called the coefficient of determination adjusted for
degrees of freedom, which has been adjusted to take into account the sample size and the number of
independent variables.

ANS: T

24. In reference to the equation , the value 0.80 is the y-intercept.

ANS: T

25. In testing the significance of a multiple regression model with three independent variables, the null
hypothesis is .

ANS: F

26. A multiple regression equation has a coefficient of determination of 0.81. Then, the percentage of the
variation in y that is explained by the regression equation is 90%.

ANS: F

27. In reference to the equation , the value 0.12 is the average change in y per
unit change in x1, when x2 is held constant.

ANS: T

28. In reference to the equation , the value 0.60 is the average change in y per
unit change in x2, regardless of the value of x1.

ANS: F

29. In regression analysis, the total variation in the dependent variable y, measured by , can be
decomposed into two parts: the explained variation, measured by SSR, and the unexplained variation,
measured by SSE.

ANS: T

30. When an additional explanatory variable is introduced into a multiple regression model, coefficient of
determination adjusted for degrees of freedom can never decrease.

ANS: F

31. In multiple regression analysis, when the response surface (the graphical depiction of the regression
equation) hits every single point, the sum of squares for error SSE = 0, the standard error of estimate
s = 0, and the coefficient of determination R2 = 1.

ANS: T

32. A multiple regression model is assessed to be good if the error sum of squares SSE and the standard
error of estimate s are both small, the coefficient of determination R2 is close to 1, and the value of
the test statistic F is large.

ANS: T
 Name: _____________________________________ Roll #:____________________

33. The coefficient of determination R2 measures the proportion of variation in y that is explained by the
explanatory variables included in the model.

ANS: T

34. When an additional explanatory variable is introduced into a multiple regression model, the
coefficient of determination will never decrease.

ANS: T

35. A multiple regression is called "multiple" because it has several explanatory variables.

ANS: T

36. When an explanatory variable is dropped from a multiple regression model, the coefficient of
determination can increase.

ANS: F

37. When an explanatory variable is dropped from a multiple regression model, the adjusted coefficient of
determination can increase.

ANS: T

38. From the coefficient of determination, we cannot detect the strength of the relationship between the
dependent variable y and any individual independent variable.

ANS: T

39. The total variation in y in a regression model will never exceed the regression sum of squares (SSR).

ANS: F

40. A high value of the coefficient of determination significantly above 0 in multiple regression,
accompanied by insignificant t-statistics on all parameter estimates, very often indicates a high
correlation between independent variables in the model.

ANS: T

41. A multiple regression model has the form . The coefficient b1 is interpreted as
the average change in y per unit change in x1.

ANS: F

42. Regression analysis allows the statistics practitioner to use mathematical models to realistically
describe relationships between the dependent variable and independent variables.

ANS: T

43. A first-order polynomial model with one predictor variable is the familiar simple linear regression
model.

ANS: T
 Name: _____________________________________ Roll #:____________________

44. We interpret the coefficients in a multiple regression model by holding all variables in the model
constant.

ANS: F

45. The model is used whenever the statistician believes that, on average, y is
linearly related to x1 and x2 and the predictor variables do not interact.

ANS: T

46. Suppose that the sample regression line of the first-order model is . If we examine
the relationship between y and x1 for three different values of x2, we observe that the effect of x1 on y
remains the same no matter what the value of x2.

ANS: T

47. The model y = 0 + 1x + 2x2 +  is referred to as a simple linear regression model.

ANS: F

48. In the first-order model , a unit increase in x2, while holding x1 constant, increases the
value of y on average by 5 units.

ANS: T

49. In the first-order model , a unit increase in x2, while holding x1 constant
at a value of 3, decreases the value of y on average by 3 units.

ANS: F

50. The model y = 0 + 1x1 + 2x2 + 3x1x2 +  is referred to as a second-order model with two predictor
variables with interaction.

ANS: F
Name: _____________________________________ Roll #:____________________

Question:

A furniture store gets an average of 50 customers per shift. The manager of furniture shop wants to
calculate whether she should hire one, two, three or four salespeople. She has determined that average
times will be seven minutes with one salesperson, four minutes with two salespersons, three minutes
with three salespersons, and two minutes with four salespersons. She has estimated the cost per minute
that customers wait at $1. The cost per salesperson per shift (including fringe benefits) is $70. How
many salespeople should be hired?

Based on the table given below, explain the trade off and the optimal strategy?

Number of Salespeople
1 2 3 4
Average number of customers per shift 50 50 50 50
Average waiting time (minutes)per customer 7 4 3 2
Total waiting time (minutes) per shift 350 200 150 100
Cost per minute of waiting time (estimated) $1 $1 $1 $1
Value of lost time per shift $350 $200 $150 $100
Salaray cost per shift $70 $140 $210 $280
Total cost per shift $420 $340 $360 $380

Because the minimum total cost per shift relates to two salespeople, the manager’s optimum strategy is
to hire two salespeople.