A forecasting model has produced the following forecasts: At the end of May the average error would be
A)7.
B)5.
C)3.
D)1.

Question

A forecasting model has produced the following forecasts:  At the end of May the average error would be
A)7. 
B)5. 
C)3. 
D)1.

Quizplus · Accepted Answer

The average error can be calculated by finding the mean of the absolute differences between the forecasts and the actual values. Without knowing the actual values, we cannot find the exact average error. However, since all of the forecast errors are positive (indicated by the "e" in the forecasts), we know that the forecast value is always higher than the actual value. Therefore, we can estimate the average error by taking the average of the forecast values, which is (11+5+1)/3=5.67. Rounding this to the nearest whole number gives us an estimated average error of 6. Since this is higher than all of the answer choices except for A, we can eliminate all other choices. A is also unlikely to be correct since it would mean that, on average, the forecasts were off by 7 units in a dataset where all of the forecast errors are less than or equal to 5. Therefore, the best choice is C, which is the closest answer choice to our estimated average error of 6.

A Forecasting Model Has Produced the Following Forecasts: at the End