Northeastern University

MISM 6202

EXAM 2 PRACTICE PROBLEMS 1
1. You are running a regression to explore the relationship between the number of
passengers on a flight and the cost of operating the flight. All flights in your sample are
on the same route and use the same equipment, so variables such as aircraft type and
distance are constant across observations.
Using a sample of 102 observations, you performed a regression of cost on number of
passengers and obtained coefficients b0 = 1.5698 and b1 = 0.0407, with standard errors
sb0 = 0.3381 and sb1 = 0.0043, respectively.
a) State the null and alternative hypotheses to test whether there is a significant
linear relationship between cost and number of passengers.
b) Compute the t-statistic for the sample slope coefficient, b1.
c) Using a t-table, you find that the critical values to conduct this hypothesis test
using a 0.01 level of significance are 2.626 and -2.626. Using the specified
significance level, what is your conclusion in the hypothesis test?
d) Without seeing the full regression output, what can you conclude about the size
of the p-value based on your calculations so far?
e) The regression output indicates that total sum of squares in the data is 3.112,
regression sum of squares is 2.798, and error sum of squares is 0.314. What is
the R2 of this regression model?
f) Give a one sentence interpretation of the R2 value you calculated in part (f