Answered: D SUMMARY OUTPUT Regression Statistics…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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As newly appointed “Energy Czar,” your goal is to reduce the total demand for residential heating fuel in your state. You must choose one of three legislative proposals designed to accomplish this goal: (a) a tax that would effectively increase the price of residential heating fuel by $1, (b) a subsidy that would effectively reduce the price of natural gas by $3, or (c) a tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $4. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented as follows. Based on this information, which proposal would you favor? Explain.

D
SUMMARY OUTPUT
Regression Statistics
Multiple R
R-Square
Adjusted R-Square
Standard Error
4
0.76
0.57
0.49
47.13
Observations
25
10
Analysis of Variance
Degrees of
Freedom
Sum of Squares
Mean Square
15234.14
11
Significance F
12
Regression
Residual
60936.56
6.86
.03
13
20
44431.27
2221.56
14
Total
24
105367.84
15
t-Statistic
Upper 95%
223.32
16
Coefficients
Standard Error
P-Value
Lower 95%
17
50.60
Intercept
Price of Residential Heating Fuel
136.96
43.46
3.15
0.01
18
-91.69
29.09
-3.15
0.01
-149.49
-33.89
19
Price of Natural Gas
43.88
9.17
4.79
0.00
25.66
62.10
20
Price of Electricity
-11.92
8.35
-1.43
0.17
-28.51
4.67
21
Income
-0.050
0.3500
-0.14
0.90
-0.75
0.65

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