If We Fit a Linear Trend to 10 Observations on Time-Series

question 112

Multiple Choice

If we fit a linear trend to 10 observations on time-series data that are growing exponentially, then it is most likely that:

• A)the fitted trend will be too high at t = 1 and t = 10.
• B)the fitted trend will be too low in the middle.
• C)the forecasts (if extrapolated) will be too low.
• D)the residuals will show a pattern like - - - + + + + - - -.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or output, such as raw materials and direct labor expenses.

Total Cost

The complete cost of production that includes both variable and fixed expenses.

Marginal Cost

The financial outlay required to produce an additional single unit of a product or service.

Variable Cost

Costs that change in proportion to the level of goods or services that a business produces, such as materials and labor.