Using Advertised Prices for Used Ford Escorts a Linear Model $\mathrm { R } ^ { 2 }$

question 27

Multiple Choice

Using advertised prices for used Ford Escorts a linear model for the relationship between a car's age and its price is found.The regression has an $\mathrm { R } ^ { 2 }$ = 85.8%.Why doesn't the model explain 100% of the variation in the price of an Escort?

• A)The model was calculated incorrectly.It should explain all the variation in price.
• B)The model is only right 85.8% of the time.
• C)14.2% of the time the buyer is getting ripped off by an unscrupulous seller.
• D)The prices of all used Ford Escorts were not used.
• E)There are other factors besides age that affect the price.These include things such as mileage,options,and condition of the car.

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Definitions:

Liabilities

Economic obligations or debts that an entity is required to pay to another party.

Owner's Equity

The net assets belonging to shareholders or owners of an entity after liabilities are accounted for, denoting their ownership claim.

Net Income

The company's net income, which is the remainder after deducting all expenses, taxes, and costs from the gross revenue.

Drawings

The act of the business owner taking out money or assets from the enterprise for private use.