As an auto insurance risk analyst, it is your job to research risk profiles for various types of drivers. One common area of concern for auto insurance companiesis the risk involved when offering policies to younger, less experienced drivers. The U.S. Department of Transportation recently conducted a study in which itanalyzed the relationship between 1) the number of fatal accidents per 1000 licenses, and 2) the percentage of licensed drivers under the age of 21 in a sampleof 42 cities.Your first step in the analysis is to construct a scatterplot of the data.FIGURE. SCATTERPLOT FOR U.S. DEPARTMENT OF TRANSPORATION PROBLEMU.S. Department of TransportationThe Relationship Between Fatal Accident Frequency and Driver Age4.53.532.52.1.50.58.101214161820Percentage of drivers under age 21Upon visual inspection, you determine that the variables do have a linear relationship. After a linear pattern has been established visually, you now proceed withperforming linear regression analysis. The results are as follows:TABLE. LINEAR REGRESSION OUTPUTFORU.S. DEPARTMENT OF TRANSPORTATION PROBLEMStandard Errort Statisticp-valueCoefficients-1.59740.3717-4.29790.0001Intercept0.28710.02949.76710.0000Percent Under 21Fatal accidents per 1000 licenses1. A final step in regression analysis is an examination of the residuals in a residual plot. This allows you to test the assumptions of the regression model itself bylooking for patterns in the residuals. The residual plot for the problem is as follows:FIGURE. RESIDUAL PLOT FOR U.S. DEPARTMENT OF TRANSPORATION PROBLEMPercentUnder 21 Residual Plot21.50.5半1012141618206.-0.5-1-1.5Percentunder 21Which statement offers the best interpretation of the residual plot?O It appears that the residual plot exhibits a pattern whereby a linear model may not be adequate or the best fit, indicating that an assumption of the linear model mayhave been violated.O It appears that the residual plot exhibits a good pattern of constant variance, indicating that the equal variance assumption of the model is supported.It appears that the residual plot exhibits a good pattern of constant variance, indicating that the equal variance assumption of the model is not supported.O It appears that the residual plot exhibits a pattern of non-constant variance, indicating that an assumption of the linear model may have been violated.米米* *1.Residuals

There is an assumption of homoscedasticity which states that the residual should have same or equal…

A final step in regression analysis is an examination of the residuals in a residual plot. This allows you to test the assumptions of the regression model itself by looking for patterns in the residuals. The residual plot for the problem is as follows: FIGURE. RESIDUAL PLOT FOR U.S. DEPARTMENT OF TRANSPORATION PROBLEM Percent Under 21 Residual Plot 2 1.5 1 0.5 半 to 16 10 12 14 18 20 -0.5 -1 -1.5 Percent under 21 Which statement offers the best interpretation of the residual plot? O It appears that the residual plot exhibits a pattern whereby a linear model may not be adequate or the best fit, indicating that an assumption of the linear model may have been violated. O It appears that the residual plot exhibits a good pattern of constant variance, indicating that the equal variance assumption of the model is supported. aEcumption of the model is not supported. Residuals -00

A final step in regression analysis is an examination of the residuals in a residual plot. This allows you to test the assumptions of the regression model itself by looking for patterns in the residuals. The residual plot for the problem is as follows: FIGURE. RESIDUAL PLOT FOR U.S. DEPARTMENT OF TRANSPORATION PROBLEM Percent Under 21 Residual Plot 2 1.5 1 0.5 半 to 16 10 12 14 18 20 -0.5 -1 -1.5 Percent under 21 Which statement offers the best interpretation of the residual plot? O It appears that the residual plot exhibits a pattern whereby a linear model may not be adequate or the best fit, indicating that an assumption of the linear model may have been violated. O It appears that the residual plot exhibits a good pattern of constant variance, indicating that the equal variance assumption of the model is supported. aEcumption of the model is not supported. Residuals -00

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Textbook authors must be careful that the reading level of their book is appropriate for the target audience. Some methods of assessing reading level require estimating the average word length. We've randomly chosen 20 words from a randomly selected page in Intro Stats and counted the number of letters in each word: 5, 5, 2, 11, 3, 5, 6, 8, 5, 4, 7, 2, 9, 4, 8, 10, 4, 7, 6, 9 Suppose that our editor was hoping that the book would have a mean word length of 6.8 letters. Does this sample indicate that the authors failed to meet this goal? With a significance level of 0.05, test an appropriate hypothesis and state your conclusion. (i.e state the appropriate null and alternative hypotheses, calculate the test statistic, conclude and interpret it).