Answer 1 Answer 2 Step 1: Multiple regression is sometimes used in litigation. I
ID: 3313117 • Letter: A
Question
Answer 1
Answer 2
Step 1:
Multiple regression is sometimes used in litigation. In the case of Cargill, Inc. v. Hardin, the prosecution charged that the cash price of wheat was manipulated in violation of the Commodity Exchange Act. In a statistical study conducted for this case, a multiple regression model was constructed to predict the price of wheat using three supply-and-demand explanatory variables. Data for 14 years were used to construct the regression equation, and a prediction for the suspect period was computed from this equation. The value of was 0.989.
The fitted model gave the predicted value $2.136 with standard error of prediction $0.013.
Express the prediction (at the 5% confidence level) as an interval. (The degrees of freedom were large for this analysis, so use 100 as the to determine .)
Round your answers to the nearest cent.
Fill in the blanks:
A) Left end-point: $ _______ .
B) Right end-point: $ _______ .
Answer 1
Answer 2
Step 2:
The actual price for the period in question was $2.13.
The judge decided that the analysis provided evidence that the price was not artificially depressed, and the opinion was sustained by the court of appeals. Write a short summary of the results of the analysis that relate to the decision and explain why you agree or disagree with it.
True or False:
Since the standard error is $0.013, the values are the expected range of variability.
The actual price $2.13 falls within this region, therefore the price was not artificially depressed.
Explanation / Answer
95% confidence interval for predicted value = y ± standard error * t*
Where y is the predicted value and t* is the critical value
t* at 5% level of significance for 100 df = 1.984 (from t table)
95% confidence interval for predicted value = 2.136 ± 1.984*0.013 = (2.1102, 2.1618)
Lower limit/left end point = 2.1102
Upper limit/right end point =2.1618
It is true that the price was not artificially depressed because the actual price $2.13 falls within the region (2.1102, 2.1618).
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