20 points Consider the following equation relating dollars s

(20 points) Consider the following equation relating dollars spent on soft drink
advertising by a company to dollars of sales of its product in a quarter:
Sales = 2,326,000,000 + 1.25 advertising - 0.00000000000004 advertising2
(429,000,000)              (0.432)                       (0.0000000000000015)
n = 36, R2= 0.1988
Here sales represents dollars sales of the product and advertising represents dollars
spent on advertising.
Note: There are 13 zeroes after the decimal place and before the 4 in the advertising^2
coefficient. There are 14 zeroes after the decimal place and before the 1 in its standard
error term.
a. At what point does the effect of advertising on sales become negative?
b. Does it make sense to include the quadratic term in the model?
c. Does it make sense to spend money on advertising? At which level of
advertising is the increase in sales from advertising less than the amount spent
on advertising?
d. Define advbil as spending on advertisment in millions of dollars and rewrite the
estimated equation with advbil and advbil^2
as the independent variables, i.e.
advbil = advertising/1,000,000.

Solution