Chapter 10, Problem 10.38P

Multiple regression (continuation of 10-42). After further discussion, Julie and Rhett wonder if they should view both the number of procedures and number of patient-hours as cost drivers in a multiple regression estimation in order to best understand Apollo’s medical supplies costs.

1. 1. Conduct a multiple regression to estimate the regression equation for medical supplies costs using both number of procedures and number of patient-hours as independent variables. You should obtain the following result:

    Required

Regression 3

Medical supplies costs = a + (b₁ × No. of procedures) + (b₂ × No. of patient-hours)

1. 2. Evaluate the multiple regression output using the criteria of economic plausibility goodness of fit, significance of independent variables, and specification of estimation assumptions.
2. 3. What potential issues could arise in multiple regression analysis that are not present in simple regression models? Is there evidence of such difficulties in the multiple regression presented in this problem? Explain.
3. 4. Which of the regression models from Problems 10-42 and 10-43 would you recommend Julie Chen use? Explain.