Three predictor variables are being considered for use in a ...

[cartlidgeashley]

Three predictor variables are being considered for use in a linear regression model. Given the correlation matrix below, does it appear that multicollinearity could be a problem?
 
  x1 x2 x3
  x1 1.000
  x2 0.025 1.000
  x3 0.968 0.897 1.000

Question 2

In an outsourcing decision model, the total purchased cost is the product of the unit cost of outsourcing and demand volume.
 
  Indicate whether the statement is true or false

[Brenm]

Answer to Question 1

It appears that multicollinearity could be a problem because x3 is highly correlated with both x1 and x2.

Answer to Question 2

TRUE