Question #81
Reading: Reading 1 Multiple Regression
PDF File: Reading 1 Multiple Regression.pdf
Page: 38
Status: Unattempted
Question
Consider the following regression equation: Salesi = 20.5 + 1.5 R&Di + 2.5 ADVi – 3.0 COMPi where Sales is dollar sales in millions, R&D is research and development expenditures in millions, ADV is dollar amount spent on advertising in millions, and COMP is the number of competitors in the industry. Which of the following is NOT a correct interpretation of this regression information?
Answer Choices:
A. If R&D and advertising expenditures are $1 million each and there are 5 competitors, expected sales are $9.5 million
B. If a company spends $1 more on R&D (holding everything else constant), sales are expected to increase by $1.5 million
C. One more competitor will mean $3 million less in sales (holding everything else constant)
Explanation
If a company spends $1 million more on R&D (holding everything else constant), sales are
expected to increase by $1.5 million. Always be aware of the units of measure for the
different variables.