What Is the Relationship Between Diamond Price and Carat Size

question 81

Multiple Choice

What is the relationship between diamond price and carat size? 307 diamonds were sampled (ranging in size from 0.18 to 1.1 carats) and a straight-line relationship was hypothesized between y = diamond price (in dollars) and x = size of the diamond (in carats) . The simple linear regression for the analysis is shown below: Least Squares Linear Regression of PRICE Interpret the estimated y-intercept of the regression line.

• A) When a diamond is 0 carats in size, we estimate the price of the diamond to be $11,598.90.
• B) When a diamond is 0 carats in size, we estimate the price of the diamond to be $2298.36.
• C) When a diamond is 11598.9 carats in size, we estimate the price of the diamond to be $2298.36.
• D) No practical interpretation of the y-intercept exists since a diamond of 0 carats cannot exist and falls outside the range of the carat sizes sampled.

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Definitions:

Fixed Costs

Costs that do not change with the level of goods or services produced by the business.

Break-even Sales

The amount of revenue from sales required to cover all fixed and variable costs of operating a business, resulting in no net profit or loss.

Variable Costs

Costs that change in proportion to the activity of a business.

Property Taxes

Taxes levied by local governments based on the assessed value of property, including land and buildings owned.