Suppose you work for AMC Cinemas (a national chain of movie theaters).You try to forecast future revenue from movie ticket sales based on the number of competing theaters within 15 miles, the ticket price at the nearest competitor, advertising expenditures, the local unemployment rate, and average outdoor temperature.

Answer the following questions.

(a)Does the scenario above describe anydummy variables?Explain.(4 points)

(b)A co-worker claims that this would be an example ofbasicresearch.Do you agree?Explain.(4 points)

(c)If a predicted value of ticket-based revenue for a theater (Y) has alarge residual, what does that mean (in terms of regression analysis)?(5 points)