Question 1 (30 marks) Table 3. Regression model predicting Average Fare Dependent variable: Average fare The U.S. Department of Transportation regularly publishes information on key characteristics of flight adjusted R-squared: 0.43 activity on domestic routes (airfares, passengers, and so on). Table 1 summarizes five such characteristics for 1,000 domestic routes across the fourth quarter of 2002, and Table 2 shows Coefficient Standard error correlations among the five variables. Distance 0.0473 0.0025 Weekly passengers -0.0041 0.0017 Table 1. Descriptions and descriptive statistics for all variables Largest market share 0.4170 0.0822 Variable Description Mean SD Min Max Budget market share -0.6117 0.0530 Average fare Average fare (in US$) on route from 163.38 55.37 50.52 401.23 Intercept 112.1859 7.2857 city 1 to city 2 Distance Distance (in miles) between city 1 1,056.97 643.20 108 2,724 and city 2 e. Using the p-value to assess significance against a = 0.05, which of the four variables Weekly passengers Average weekly number of 672.28 766.52 181.41 8,950.76 predicts Average fare with sufficient precision? passengers on route from city 1 to (5 marks) city 2 f. What would be the expected Average Fare on a route between cities 400 miles apart, with Largest market share Market share (in %) of market leader 60.13 19.37 17.68 100 an average of 700 weekly passengers, and on which the lowest-cost carrier has a on route from city 1 to city 2 monopoly? Budget market share Market share (in %) of lowest-cost 34.55 27.10 1.06 100 (5 marks) carrier on route from city 1 to city 2 Table 2. Correlations among all variables Variable 2 3 1 Average fare 2 Distance 0.59 3 Weekly passengers -0.13 -0.09 4 Largest market share 0.23 -0.53 -0.07 5 Budget market share -0.46 -0.37 0.03 0.31 a. Is Weekly passengers skewed? If so, then is the skew positive or negative? (5 marks) b. Is the market leader on a route typically a budget airline? (5 marks) C. What percentage of the variance in Average Fare is associated with the weekly number of passengers between two cities? (5 marks) d. Which variable explains the smallest share of the variance in Average Fare? (5 marks) Table 3 shows results of a multiple linear regression predicting Average Fare