The Difference Between Formulas for Constructing a Confidence Interval and a Prediction

question 117

Multiple Choice

The difference between formulas for constructing a confidence interval and a prediction interval is

• A) the prediction interval is the square root of the confidence interval.
• B) the addition of "1" to the quantity under the radical sign.
• C) the prediction interval uses r2 and the confidence interval uses r.
• D) no difference.

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Definitions:

Shut Down

A short-term decision by a firm to cease operations and production when the market price is below its variable costs, to minimize losses.

Economic Loss

A situation where total costs exceed total revenues, leading to a negative economic profit.

AVC

Average Variable Cost, an economic metric reflecting the variable costs (such as labor and materials) per unit of output.

ATC

Average Total Cost, which is the sum of all production costs divided by the quantity of output produced, a critical factor in economic analysis of a company's efficiency.