A fitted regression Profit = 262 + 1.51 Sales (all variables in thousands of dollars) was estimated from a random sample of 15 small coffee kiosks. We can say that: A)the slope is too small to be significant. B)the intercept does not seem reasonable. C)the R² will be low due to small sample size. D)predictions are likely to be underestimated.

Question

Quizplus · Accepted Answer

The intercept in a regression equation represents the expected value of the dependent variable (in this case, Profit) when all independent variables (in this case, Sales) are equal to zero. Saying the intercept "does not seem reasonable" implies a judgment about the practicality or realism of the intercept value in the context of the problem. In this scenario, an intercept of 262 (thousands of dollars) as a base profit without any sales might not seem reasonable because it suggests a significant profit even without any sales, which is unlikely for small coffee kiosks. The other options (A, C, D) cannot be definitively assessed as correct or incorrect without additional statistical output (e.g., p-values for significance, information on the size of the residuals for underestimation, or details on the model's fit for the comment on R-squared) or context (e.g., the economic environment of the kiosks).

A Fitted Regression Profit = 262 + 1