Part (i) (3 points) Consider a new “Gasoline dummy” variable that is “1” when a

Question

Part (i)             (3 points)

Consider a new “Gasoline dummy” variable that is “1” when a truck has a gasoline engine and “0” when it has a Diesel engine. Suppose that we then run a new multiple regression with “Maintenance cost per month” as dependent variable on the following independent variables: “Age,” “Miles per month,” and “Gasoline dummy.” (That is, it is the same regression as in Part (a), but with the “Gasoline dummy” variable instead of the “Diesel dummy.”) What would the estimated value of the coefficient on the “Gasoline dummy” be?

*** Continued on p. 3 ***

Part (j)             (2 points)

What percentage of the variation in the dependent variable can be explained by variation in the independent variables?

Part (k)            (2 points)

What percentage of the variation in the dependent variable cannot be explained by variation in the independent variables?

Speedy Delivery's Truck Maintenance Maintenance cost per month (in Dollars) Age (in years) Miles per month Diesel dummy (1 = Diesel; 0 = gasoline) 382 3 818 0 469 8 812 1 503 8 857 1 432 6 819 1 478 6 821 1 493 10 1008 1 461 6 849 1 503 10 883 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 561 12 838 1 496 8 839 1 466 10 865 0 422 8 869 0 474 10 845 0 558 10 885 0 497 10 859 0 355 3 806 0 436 2 785 0 514 11 980 0 497 10 859 0 355 3 806 0 436 2 785 0 514 11 980 0 466 10 865 0 422 8 869 0 474 10 845 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1 329 3 741 1 478 6 821 1 493 10 1008 1 558 10 885 0 359 7 751 0 427 5 780 0 474 9 857 0 382 3 818 0 459 8 826 0 406 3 798 0 459 8 826 0 359 7 751 0 427 5 780 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1 329 3 741 1 478 6 821 1 474 9 857 0 382 3 818 0 406 3 798 0 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 444 2 757 1 452 9 831 1 561 12 838 1 496 8 839 1 466 10 865 0 422 8 869 0 474 10 845 0 558 10 885 0 406 3 798 0 452 9 831 1 546 8 870 1 380 9 803 1 471 9 815 1 329 7 853 1 505 10 822 1 359 7 751 0 427 5 780 0 474 9 857 0 382 3 818 0 459 8 826 0 406 3 798 0 459 8 826 0 359 7 751 0 427 5 780 0 329 7 853 1 505 10 822 1 433 9 848 1 357 8 760 1

Explanation / Answer

i)

Estimated Gasoline coefficient is -1.89799

j)

percentage of the variation in the dependent variable can be explained by variation in the independent variables is R^2 = 37.71 %

k)

percentage of the variation in the dependent variable cannot be explained by variation in the independent variables is 1-R^2 = 62.29%

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 24.30644 94.54033 0.257101 0.797694 -163.543 212.1561 -163.543 212.1561 Age (in years) 7.773931 2.448827 3.174553 0.002062 2.908164 12.6397 2.908164 12.6397 Miles per month 0.438067 0.125793 3.482449 0.000772 0.18812 0.688015 0.18812 0.688015 Diesel dummy (0 = Diesel; 1 = gasoline) -1.89799 10.74104 -0.1767 0.860142 -23.2402 19.44422 -23.2402 19.44422

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