McMahon and Tate advertising company is interested in an appropriate mix of print, radio, and television ads for their new client. Darrin Stevens performs a multiple regression on the effects of dollars spent on each type of media on dollars of sales of product. Darrin uses data from the most recent advertising campaigns and develops the following equation: y = 254,215 + 6.79 × Print - 1.4 × Radio + 16.87 × Television
The r-squared statistic is 0.77 and all coefficients are significant. Which of the following statements is best?
A)At a minimum, the client will sell $254,215 worth of product after the new advertising campaign.
B)At a maximum, the client will sell $254,215 worth of product after the new advertising campaign.
C)This equation will be of no use in predicting the amount of sales based on advertising in these media.
D)The client should spend more money on television advertising than on radio advertising.

Question

Quizplus · Accepted Answer

The coefficient for television advertising is the highest, indicating that it has the strongest positive effect on sales compared to the other two media. Additionally, the coefficient for radio advertising is negative, indicating that it has a negative effect on sales. Therefore, the client should focus on spending more money on television advertising and potentially decrease spending on radio advertising. Option A and B are incorrect because the $254,215 value is the constant term and does not represent a maximum or minimum. Option C is incorrect because the equation has a significant level of predictive power, as shown by the 0.77 R-squared value.

McMahon and Tate Advertising Company Is Interested in an Appropriate