Statement of a problem № m41390


Decision Science Associates was asked to do a feasibility study for a proposed destination resort to be located within half a mile of the Grand Coulee Dam. Mark Craze was not happy with the regression model that used the price of a regular gallon of gasoline to predict the number of visitors to the Grand Coulee Dam Visitors Center. After plotting the data on a scatter diagram, Mark decided to use a dummy variable to represent significant celebrations in the general area. Mark used a 1 to represent a celebration and a 0 to represent no celebration. The 1 in 1974 represents the Expo 74 World s Fair celebrated in Spokane, Washington, the 1 in 1983 represents the celebration of the 50th anniversary of the construction of Grand Coulee Dam, and the 1 in 1986 represents the World s Fair held in Vancouver, Canada. Mark also decided to use time as a predictor variable. The data are shown in Table P-10. Suppose you were asked to write a report for Mark to present to his boss. Indicate whether serial correlation is a problem. Also indicate what additional information would be important in deciding whether to recommend that the destination resort be built.

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