Which of the Following Statements Is Correct

question 41

Multiple Choice

Which of the following statements is correct?

• A) A process can be in statistical control, yet it can be producing defects in abundance.
• B) At least three points outside the upper or lower control limits on a control chart are required before the process is deemed to be out of control.
• C) If a process is out of control, then the variation that is present is limited to common cause variation.
• D) When special cause variation is present, the process can be expected to be in control.

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Definitions:

Characteristic Line

In finance, this is a line generated in a statistical plot to describe how the returns of a security relate to the returns of the overall market, used in the Capital Asset Pricing Model (CAPM).

Market Risk

The risk of losses in investments due to factors that affect the entire market, such as economic recessions or political instability.

Scatter Diagram

A graphical representation displaying the relationship or correlation between two numerical variables, with data points plotted on a horizontal and vertical axis.

Proxy Market Portfolio

A proxy market portfolio is a theoretical bundle of investments that represents a broad market segment, used in financial models to simulate the behavior of entire markets.