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Suppose a Firm Reports the Following Results Using the Least-Squares

question 5

Essay

Suppose a firm reports the following results using the least-squares regression method:
Y = $750 - $2.56X
Y is the daily repair and maintenance cost and X is the daily units of production in hundreds.The daily observations were over a one-month period.The results do not make sense to the manager of the repair and maintenance department.
Required:
What is the most plausible explanation for the apparently meaningless results?


Definitions:

Technology

The application of scientific knowledge for practical purposes, especially in industry, which drives innovation, efficiency, and the development of new products and processes.

Total Costs

The total of all costs associated with producing goods or services, encompassing both fixed and variable expenses.

Average Variable Costs

The total variable costs divided by the quantity of output produced, representing the variable costs per unit of output.

Cars

Motor vehicles designed primarily for passenger transportation.

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