A marketing manager has developed a regression model to predict quarterly sales of his company’s mid-weight microfiber jackets based on price and amount spent on advertising. An intern suggests that he include indicator (dummy) variables for each quarter. Complete parts (a) through (c) below.a) How would you code the variables? (How many dummy variables do you need? What values would they have?).b) Why does the intern’s suggestion make sense?

A.

There should be 1 variable. The values could be 0 for spring, 1 for summer, 2 for fall, and 3 for winter.

B.

There should be 1 indicator variable for one season. The season chosen does not matter, but it should have a value of 1 for that season and 0 for the others.

C.

There should be 3 variables. The variables could be spring (1 for spring, 0 for others), summer (1 for summer, 0 for others), and fall (1 for fall, 0 for others).

D.

There should be 4 variables. The variables could be spring (1 for spring, 0 for others), summer (1 for summer, 0 for others), fall (1 for fall, 0 for others), and winter (1 for winter, 0 for others)

Which of the following is the best description of what a residual plot should look like to indicate the linearity and constant variation conditions are satisfied?Choose the correct answer below.

A.

The wake of a speed boat racing across a lake. The residuals in a residual plot should look like the pattern of the wake.

B.

The shape of an adult butterfly. The residuals in a residual plot should look like the shape of the butterfly.

C.

Knock over a salt shaker on the table. The salt on the table will be concentrated around the shaker but will become more spread the further it is from the shaker. The residuals in a residual plot should look like the salt on the table.

D.

Take a handful of confetti, toss it in the air, and let it fall to the ground. It should fall randomly dash-no patterns to the confetti should be apparent once it lands on the ground. The residuals in a residual plot should look like the confetti on the ground.

E.

Watch the cars on a roller coaster. The residuals in a residual plot should follow the pattern the cars on a roller coaster make from the beginning of the ride to the end