Question

linear regression model describing the relationship between the carat weight and price of very high quality diamonds is summarized below.

A diamond seller lists a very high quality diamond weighing 0.8 carats at a price of $10,999. Does this model over- or under-predict the price of this diamond? Select the option below that best summarizes the answer.

		The model under-predicts the price of this diamond because the residual is positive.
		The model over-predicts the price of this diamond because the residual is positive.
		The model over-predicts the price of this diamond because the residual is negative.
		We do not have enough information to answer this question.
		The model under-predicts the price of this diamond because the residual is negative.

Answer 1

Linear regression model describing the relationship between the carat weight and price of very high quality diamonds is given.

A diamond seller lists a very high quality diamond weighing 0.8 carats at a price of $10,199.

Now, the actual price is not given.

Now, residual is actually the difference between the actual value and the predicted value.

So, in this case the residual is not found. So, whether the model under-predicts or over-predicts the price of the diamond, cannot be determined.

So, the correct answer is option (d) We do not have enough information to answer this question.