SCENARIO 14-5
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 Scenario 14-5, when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable, she obtained an r2 value of
0)601. What additional percentage of the total variation of sales has been explained by including
Capital spending in the multiple regression?
A) 60.1%
B) 31.1%
C) 22.9%
D) 8.8%

Question

SCENARIO 14-5
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 Scenario 14-5, when the microeconomist used a simple linear regression model with sales as the dependent variable and wages as the independent variable, she obtained an r2 value of
0)601. What additional percentage of the total variation of sales has been explained by including
Capital spending in the multiple regression?
A) 60.1% 
B) 31.1% 
C) 22.9% 
D) 8.8%

Quizplus · Accepted Answer

The r2 value from the simple linear regression is 0.601, which means 60.1% of the variation is explained. If including Capital spending in the multiple regression explains more variation, the additional percentage is calculated by the difference in r2 values. Assuming the new r2 value is higher, the difference would be 8.8% to reach a total of 68.9% explained variation.

SCENARIO 14-5 A Microeconomist Wants to Determine How Corporate Sales Are Influenced