It Is Desired to Build a Regression Model to Predict $\mathrm { y } =$

question 46

Multiple Choice

It is desired to build a regression model to predict $\mathrm { y } =$ the sales price of a single family home, based on the $\mathrm { x } _ { 1 } =$ size of the house and $\mathrm { x } _ { 2 } =$ the neighborhood the home is located in. The goal is to compare the prices of homes that are located in two different neighborhoods. The following model is proposed:
$$E ( y ) = \beta _ { 0 } + \beta _ { 1 } x _ { 1 } + \beta _ { 2 } x _ { 2 }$$
A regression model was fit and the following residual plot was observed.
Which of the following assumptions appears violated based on this plot?

• A) The errors are normally distributed
• B) The mean of the errors is zero
• C) The errors are independent
• D) The variance of the errors is constant

---

Definitions:

Franchisor

The parent company that develops a product or business process and sells the rights to franchisees.

Business Process

A series of steps performed by a group of stakeholders to achieve a concrete goal, typically involving defining, measuring, analyzing, improving, and controlling processes.

Business-Format Franchising

A type of franchising in which the franchisee adopts the franchisor’s entire method of operation.

Fast-Food Restaurants

Eateries that specialize in providing quick service, convenience, and food that is prepared and served quickly to customers.