Scenario 1-3 Suppose a T-Shirt Manufacturer Currently Sells 5,000 T-Shirts Per Week

question 323

Multiple Choice

Scenario 1-3
Suppose a t-shirt manufacturer currently sells 5,000 t-shirts per week and makes a profit of $10,000 per week. A manager at the plant observes, "Although the last 400 t-shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the optimal number of t-shirts."

-Refer to Scenario 1-3. Had the firm not produced and sold the last 400 t-shirts, would its profit be higher or lower, and if so by how much?

• A) Its profit would be $4,800 higher.
• B) Its profit would be $800 higher.
• C) Its profit would be $800 lower.
• D) Its profit would be $4,000 lower.

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Definitions:

SSE

Stands for Sum of Squares due to Error, representing a measure of the discrepancy between the data and an estimation model.

Degrees Of Freedom

A concept used in statistical analysis, indicating the number of independent values or quantities that can vary within an analysis without breaking any constraints.

Multiple Regression

A statistical technique that uses multiple explanatory variables to predict the outcome of a response variable.

Estimated Regression

The process of estimating the relationship between a dependent variable and one or more independent variables.