The Residual Plot for a Linear Regression Model Is Shown

question 34

Multiple Choice

The residual plot for a linear regression model is shown below. Which of the following is true?

• A) The linear model is okay because approximately the same number of points is above the line as below it.
• B) The linear model is okay because the association between the two variables is fairly strong.
• C) The linear model is okay because there is no extreme outlier.
• D) The linear model is okay because there is no pattern.
• E) The linear model is not good because of the curve in the residuals.

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Definitions:

Relationship

The connection or association between two or more entities, often referring to business partnerships or customer interactions.

Relevant Range

The range of activity within which the assumptions about fixed and variable cost behaviors hold true.

Cost Behaviour

The manner in which a cost changes as the related activity level changes, classified into fixed, variable, and mixed costs.

Cost Report

A detailed financial document that outlines the actual costs incurred during a project or for business operations over a defined period, often used for tracking and controlling expenditures.