Question

Suppose the following regression equation was generated from the sample data of 50 cities relating number of cigarette packs sold per 1000 residents in one week to tax in dollars on one pack of cigarettes and if smoking is allowed in bars:

PACKS i= 57221.431732 − 1423.696906TAXi + 155.441784BARSi + ei.
BARS i= 1 if city i allows smoking in bars and BARSi = 0 if city i does not allow smoking in bars. This equation has an R2 value of 0.351292, and the coefficient of BARSi has a P-value of 0.086529. Which of the following conclusions is valid?
A. According to the regression equation, regardless of whether or not smoking is allowed in bars, the number of cigarette packs sold per 1000 people decreases by approximately 1424 for each additional dollar of cigarette tax.
B. There is evidence at the 0.05 level of significance to support the claim that cities with a smoking ban have lower cigarette sales than those without a smoking ban.
C. According to the regression equation, cities that allow smoking in bars have lower cigarette sales than cities that do not allow smoking in bars.
D. According to the regression equation, cities that allow smoking in bars sell approximately 155 fewer packs of cigarettes per 1000 people than cities that do not allow smoking in bars.

Answer 1

A) According to the regression equation, regardless of whether or not smoking is allowed in bars, the number of cigarette packs sold per 1000 people decreases by approximately 1424 for each additional dollar of cigarette tax.

Explanation:

Given the regression equation:

PACKS i= 57221.431732 − 1423.696906TAXi + 155.441784BARSi + eᵢ.

BARS i= 1 if city i allows smoking in bars

BARSi = 0 if city i does not allow smoking in bars

R2 = 0.351292

P-value = 0.086529

Conlusion:

Simnce p value, 0.0865 is greater than level of significance, 0.05, BARS is not significant. Thus, allowing smoking in bars increase cigarette sales, since the coefficient of BARS is positive.

Correct answer is option A.

According to the regression equation, regardless of whether or not smoking is allowed in bars, the number of cigarette packs sold per 1000 people decreases by approximately 1424 for each additional dollar of cigarette tax.