Exhibit 18.3.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011. Excel scatterplot shown above indicates that the annual revenues have an increasing trend.Therefore,linear,exponential,quadratic and cubic models were used to fit the trend,and the following relevant information became available after applying linear regression. Refer to Exhibit 18.3.When three polynomial trend equations are compared,which of them provides the best fit?
A)linear
B)exponential
C)quadratic
D)cubic

Question

Exhibit 18.3.The following table shows the annual revenues (in millions of dollars)of a pharmaceutical company over the period 1990-2011.   Excel scatterplot shown above indicates that the annual revenues have an increasing trend.Therefore,linear,exponential,quadratic and cubic models were used to fit the trend,and the following relevant information became available after applying linear regression.  Refer to Exhibit 18.3.When three polynomial trend equations are compared,which of them provides the best fit?
A)linear 
B)exponential 
C)quadratic 
D)cubic

Quizplus · Accepted Answer

The cubic model provides the best fit as it has the highest R-squared value (0.983) compared to the linear (0.888) and quadratic (0.979) models. This indicates that the cubic model explains a greater proportion of the variance in the data and is a better predictor of future revenues.