For a certain firm, the regression equation Bonus = 2,000 + 257 Experience + 0.046 Salary describes employee bonuses with a standard error of 125. John has 10 years' experience, earns $50,000, and earned a bonus of $7,000. John is an outlier.

Question

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To determine if John is an outlier, we calculate his predicted bonus using the regression equation: Bonus = 2,000 + 257(10) + 0.046(50,000) = 2,000 + 2,570 + 2,300 = 6,870. John's actual bonus is $7,000, which is close to the predicted value, and the difference is not significantly larger than the standard error of 125, suggesting he is not an outlier.

For a Certain Firm, the Regression Equation Bonus = 2,000