The following is a scatterplot of a company\'s profits versus their sales (in do
ID: 3263551 • Letter: T
Question
The following is a scatterplot of a company's profits versus their sales (in dollars). Each point on the plot represents profits and sales during one of the months in the sample.
Which of the following statements is supported by the plot?
a) There is no striking evidence in the plot that the assumptions for regression are violated and there is a clear, straight-line trend.
b) There are very influential observations in the plot suggesting that the least-squares regression line must be interpreted with extreme caution.
c) The plot contains dramatic evidence that the standard deviation of the response about the true regression line is not even approximately the same everywhere.
d) The plot contains many fewer points than are needed to fit the least-squares regression line. Obviously, there is a major error present.
Explanation / Answer
Check the scatter plot.
Do you see an outlier? There are couple of them which will be very influential in the dataset. Hence, they must be treated with extreme caution.
If they lie on the same line as the regresison line without the extreme points, then its ok. But if that doesn't happen they are influecing the linear regression line in a big way.
Thus, B is the right answer
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