It Is Dangerous to Predict Outside the Range of the Data

question 69

Multiple Choice

It is dangerous to predict outside the range of the data collected in a regression analysis. For instance, we shouldn't predict the price of a 5000 square foot home if all our sample homes were smaller than 4500 square feet. Which of the following multiple regression pitfalls does this example describe?

• A) Estimability
• B) Multicollinearity
• C) Stepwise Regression
• D) Extrapolation

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Definitions:

Gains From Trade

The benefits that parties obtain from engaging in voluntary trade, often resulting in an increase in overall economic efficiency and consumer welfare.

Gain From Trade

Refers to the increase in output and consumption that countries experience through specialization and exchange of goods and services.

Production Possibilities Frontier

An illustration that represents the utmost production capabilities for any two commodities, based on a combination of inputs like resources and additional elements.

Self-sufficiency

The ability of an individual, household, or nation to meet all their needs without external assistance.