TABLE 13-5
A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies. She proceeds to randomly select 26 large corporations and record information in millions of dollars. The Microsoft Excel output below shows results of this multiple regression.

-Referring to Table 13-5, one company in the sample had sales of $20 billion (Sales = 20,000). This company spent $300 million on capital and $700 million on wages. What is the residual (in millions of dollars)for this data point?
A) 874.55
B) 622.87
C) -790.69
D) -983.56

Question

TABLE 13-5
A microeconomist wants to determine how corporate sales are influenced by capital and wage spending by companies. She proceeds to randomly select 26 large corporations and record information in millions of dollars. The Microsoft Excel output below shows results of this multiple regression.
 
-Referring to Table 13-5, one company in the sample had sales of $20 billion (Sales = 20,000). This company spent $300 million on capital and $700 million on wages. What is the residual (in millions of dollars)for this data point?
A) 874.55 
B) 622.87 
C) -790.69 
D) -983.56

Quizplus · Accepted Answer

Using the formula for the residual, we get:

Residual = Actual sales - Predicted sales
Residual = 20,000 - (678.07 + 1.9072(300) + 1.2295(700))
Residual = -790.69

Therefore, the residual for this data point is -$790.69 million, or approximately -$791 million. The best choice is (C).

TABLE 13-5 A Microeconomist Wants to Determine How Corporate Sales Are Influenced