Question

Suppose the following regression equation was generated from the sample data of 50 cities relating number of cigarette packs sold per 1000 residents in one week to tax in dollars on one pack of cigarettes and if smoking is allowed in bars:

PACKSi=59330.806732−1081.900031TAXi+145.285534BARSi+ei .

BARSi=1 if city i allows smoking in bars and BARSi=0 if city i does not allow smoking in bars.

This equation has an R2 value of 0.305589, and the coefficient of BARSi has a P-value of 0.097193. Which of the following conclusions is valid?

Suppose the following regression equation was generated from the sample data of 50 cities relating number of cigarette packs sold per 1000 residents in one week to tax in dollars on one pack of cigarettes and if smoking is allowed in bars: PACKS; = 59330.806732 - 1081.900031TAX; + 145.285534BARS; + ej. BARS; = 1 if city i allows smoking in bars and BARS; = 0 if city i does not allow smoking in bars. This equation has an R2 value of 0.305589, and the coefficient of BARS; has a P-value of 0.097193. Which of the following conclusions is valid? Answer Tables Keypad The tax on cigarettes and whether or not a city has a smoking ban account for 30.56 percent of the variation in cigarette sales. According to the regression equation, cities that allow smoking in bars sell approximately 145 fewer packs of cigarettes per 1000 people than cities that do not allow smoking in bars. According to the regression equation, cities that allow smoking in bars have lower cigarette sales than cities that do not allow smoking in bars. If there is no cigarette tax in a city that allows smoking in bars, the approximate number of cigarette packs sold per 1000 people is 59331.

Answer 1

Let's talk about each of the points one by one.

A) The given data has R-square = 0.305589, which means that 30.56% of the variation in cigarette sales by the independent variables. Hence, this conclusion is valid.

B) Cities that allow smoking in bars sell 145 more packs of cigarettes than cities that do not allow smoking in bars because the coefficient is positive. It is incorrect

C) Cities that allow smoking in bars have higher cigarette sales because the coefficient is positive. It is incorrect.

D) If Tax = 0, Bars = 1

Packs = 59330 - 0 + 145*1 = 59475 packs

Hence, this is incorrect too

Correct option: A)