An Ardent Fan of Television Game Shows Has Observed That

question 164

Essay

An ardent fan of television game shows has observed that, in general, the more educated the contestant, the less money he or she wins. To test her belief, she gathers data about the last eight winners of her favourite game show. She records their winnings in dollars and their years of education. The results are as follows. $$\begin{array} { | c | c | c | } \hline \text { Contestant } & \begin{array} { c } \text { Years of } \\\text { education }\end{array} & \text { Winnings } \\\hline 1 & 11 & 750 \\\hline 2 & 15 & 400 \\\hline 3 & 12 & 600 \\\hline 4 & 16 & 350 \\\hline 5 & 11 & 800 \\\hline 6 & 16 & 300 \\\hline 7 & 13 & 650 \\\hline 8 & 14 & 400 \\\hline\end{array}$$ Draw a scatter diagram of the data to determine whether a linear model appears to be appropriate.

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Definitions:

LIFO

The last-in, first-out accounting method of valuing inventories.

Economic Earnings

The real flow of cash that a firm could pay out without impairing its productive capacity.

Liquidity Ratio

A financial metric used to determine a company's ability to pay off its short-term debts with its current assets.

Current Ratio

Current assets/current liabilities. Measures the ability of the firm to pay off its current liabilities by liquidating current assets.