Question 3 (1 point)

Just the Fax, Inc. (JTF) has hired you as a consultant to analyze the demand for its line of telecommunications devices in 35 different market areas. The available data set includes observations on the number of thousands of units sold by JTF per month (Q_X), the price per unit charged by JTF (P_X), the average unit price of competing brands (P_Z), monthly advertising expenditures by JTF (A), and average gross sales (in thousands of dollars) of businesses in the market area (I). The results of a regression analysis (with standard errors in parenthesis) are given below. S.E.E. is standard error of the regression.

QX =

300

- 6PX

+ 2PZ

+ 0.04A

+ 0.01I

(200)

(1.8)

(0.65)

(0.03)

(0.003)

R2 = 0.91

S.E.E. = 3.6

If you were going to drop from the regression any independent variables for which you could not reject the null hypothesis that their estimated coefficient = 0, which variable(s) would you drop? (Hint: use the t-stat < 2 or 2.5 approximation)

Question 3 options:

a)

none

b)

A

c)

Pz

d)

I