Prices of crude oil have been steadily rising over the last two years (The Wall Street Journal,December 14,2010).The monthly data on price per gallon of unleaded regular gasoline in the United States from January 2009 to December 2010 were available.Three trend models were created,and the following relevant information became available. Which of the following would be a difference in the forecasts for the price of regular unleaded gasoline for February 2011 comparing two trend models: cubic and quadratic?
A) $0.23
B) $0.39
C) $0.18
D) $0.32

Question

Prices of crude oil have been steadily rising over the last two years (The Wall Street Journal,December 14,2010).The monthly data on price per gallon of unleaded regular gasoline in the United States from January 2009 to December 2010 were available.Three trend models were created,and the following relevant information became available.  Which of the following would be a difference in the forecasts for the price of regular unleaded gasoline for February 2011 comparing two trend models: cubic and quadratic?
A) $0.23 
B) $0.39 
C) $0.18 
D) $0.32

Quizplus · Accepted Answer

To determine the difference in forecasts between the cubic and quadratic trend models, we need to subtract the predicted value for February 2011 from each model. From the table provided, we see that the predicted value for February 2011 for the cubic model is 3.177 and for the quadratic model is 2.787. Therefore, the difference between the two models is 3.177 - 2.787 = 0.39. Therefore, the answer is B, $0.39.

Prices of Crude Oil Have Been Steadily Rising Over the Last