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Author Question: Three predictor variables are being considered for use in a linear regression model. Given the ... (Read 84 times)

cartlidgeashley

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on: Jun 24, 2018
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
Statistics, Data Analysis, and Decision Modeling ¦ Evans ¦ 5th Edition
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Brenm

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Reply #1 on: Jun 24, 2018
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


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