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In addition to state-of-the-art technologies, the production ofquality wine is strongly influenced by the natural endowments ofthe grape-growing region—called the ‘‘terroir.’’ The EconomicJournal (May 2008) published an empirical study of the factors thatyield a quality Bordeaux wine. A quantitative measure of winequality (y) was modeled as a function of several qualitativeindependent variables, including grape-picking method (manual orautomated), soil type (clay, gravel, or sand), and slopeorientation (east, south, west, southeast, or southwest).

a. Create the appropriate dummy variables for each of thequalitative independent variables.

b. Write a model for wine quality (y) as a function ofgrape-picking method. Interpret the β’s in the model.

c. Write a model for wine quality (y) as a function of soiltype. Interpret the β’s in the model.

d. Write a model for wine quality (y) as a function of slopeorientation. Interpret the β’s in the model.

e. Write an interaction model relating wine quality to the twoqualitative independent variables; grape-picking method (manual orautomated) and soil type (clay, gravel, or sand). Let ‘‘automated’’and ‘‘sand’’ represent the base levels for the two variables,respectively.

f. Interpret the value of ?0 in the model.

g. In terms of the β’s, what is the mean quality of wineproduced from grapes picked manually from clay soil?

h. In terms of the β’s, what is the difference between the meanquality of wine produced from grap