Do movies of different types have different rates of return on their budgets? Here’s scatterplot of USGross

($M) vs Budget ($M) for Comedies (red) and Adventure pictures (green):

a) What attributes of this plot suggest that it would be appropriate to use both an indicator variable and an interaction term in a regression of USGross on Budget?

b) How would you code the indicator variable? (Use Adventure as the base level.)

c) How would you construct the interaction term variable?

Transcribed Image Text:

US Gross ($M) 300 200 100 40 80 Budget ($M) 120 160