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The dataset below captures total costs (in $mm) of investor-owned electrical utilities with more than $1 million in annual revenues in 1955 (Nerlove, 1963). Assuming
The dataset below captures total costs (in $mm) of investor-owned electrical utilities with more than $1 million in annual revenues in 1955 (Nerlove, 1963). Assuming that costs depend on the price of labor, capital and raw materials (specifically, fuel), run the appropriate multiple linear regression using the data below and answer the following questions.
- What is the R2 of the regression?
- Interpret the R2.
- Which independent variable(s) have a linear relationship with total cost, in this model?
- Is there a linear relationship between total cost and the independent variables? What are the test statistic and the p-value of this test?
- Assuming a wage rate of $2.00, a capital price index of $200, and a weighted average fuel price of $25, what is your prediction for total cost?
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