2. According to the long-since expired bottle in my desk drawer, there are 4 milligrams of Chlorpheniramine Maleate in each of my allergy tablets. I’m not a Pharmacist, but I am willing to assume that it is unacceptable for each of these tablets to have significantly more or less than 4 mg of this ingredient. You are hired to test the production facility for accurate measurement of ingredients in these tablets. In the following questions, be as specific and as thorough as possible.

b. How would you design, execute, and interpret your hypothesis test? Explain every step in your methodology. (15 points)

c. Discuss the ramifications of making both Type I and II errors in this case. (10 points)

3. Greystone Department Stores supply you with the following data on customer ages from independent random samples taken at two store locations. They’ve asked you to test whether the average age of inner-city customers differs from that of suburban store customers. Use the alpha = .10 for your test. Explain the results of your test to corporate management. Would you advise them to alter their pricing or advertising strategies between the two stores? Why? (20 points)

4. The regression results on the next page describe a model of per capita chicken consumption (Y) as a function of the price of chicken (X1), the price of beef (X2) and per capita disposable income (X3). Use this output to respond to the questions below.

Qty : per capita chicken consumption (in pounds) in year t

PC_t: the price of chicken (in dollars per pound) in year t

PB_t: the price of beef (in dollars per pound) in year t

Yd_t: U.S. per capita disposable income in year t

N=40 (annual data 1951-1990)

a. Prior to conducting the regression, you should write out the complete theoretical regression equation for this model. What are your preliminary expectations for the signs of the yet-to-be-estimated coefficients? (6 points)

b. Now that you have some Excel output, interpret each estimated coefficient in terms of both size and sign. Does the sign of each make economic sense? (9 points)

c. Use the information below to calculate the t-statistics for each coefficient. The intercept is calculated for you. Fill these into your table of results. (3 points)

d. What do your t-statistics tell you with regards to the significance of each coefficient? Be thorough and refer to hypothesis tests. (9 points)

e. Use the available information to calculate adjusted-R² and fill it into the table. Interpret the meaning of this measure and comment upon the ability of the estimated model to fit the data. (5 points)

f. What can you say about overall significance for this model? What does this mean? Again, be thorough and refer to hypothesis tests. (6 points)