The Air Transport Association has reported the following kinds of information describing 23 individual U.S. airlines: total operating revenue, number of aircraft, number of employees, and number of aircraft departures. Using data file XR17017, with y = total operating revenue (millions of dollars), x1 = number of employees, and x2 = number of aircraft departures:
a. Fit a first-order model of the form E(y) = β0 + β1x1 + β2x2. Interpret the R2 value for the model and indicate whether, at the 0.01 level, the model is significant.
b. Repeat part (a), but with an interaction term included. Interpreting the R2 value, to what extent has inclusion of the interaction term improved the model’s explanatory power?