If the amount that the consultant is paid is reduced by a penalty which is 20 times the size of the error, the prediction which maximizes his payment is
A) the mean.
B) the median.
C) the mode.
D) none of these

Question

Quizplus · Accepted Answer

The median minimizes the sum of absolute deviations, which corresponds to a situation where a penalty is applied based on the size of the error. In this case, with a penalty that is 20 times the size of the error, the consultant's best strategy to maximize payment is to minimize the potential for large errors, which is achieved by predicting the median.

If the Amount That the Consultant Is Paid Is Reduced