6.With respect to multicollinearity: Explain a) what it is and why it is a problem b) how it can be detected,and c) how it can be overcome? With respect to autocorrelation, explain d) what it is and why it is aproblem e) how it can be detected, and f) how it can be overcome? ANS: 4
Problems: 1.a) Estimate by hand calculation the regression equation of the firm’s sales revenue (Y) on its qualitycontrol expenditure (call it Z) for the data given in the following table. b) plot the estimated regressionline on a graph that also shows the data points and the errors as well as interpret the estimatedcoefficients (c) What would be the sales revenue of the firm when the firm’s expenditure control onquality control is $2 million per year? and $9 million per year? Why would you expect these results tobe greatly biased? YearZY2006344200744020083422009346201044820115522012654201375820147562015860 5
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- Winter '17