The Head of Special Projects and Planning of a Network

Multiple Choice

The Head of Special Projects and Planning of a network of shops develops a plan for opening new stores. He suggests that the annual revenue of a supermarket depends mainly on the size of the sales area. A scatterplot of the data, a residual plot, and a histogram of the residuals are shown below. What do the graphs suggest about the adequacy of the simple linear regression model? ​ ​

A) The model is not appropriate, because the histogram shows that the residuals are not normally distributed.
B) The model is not appropriate, because the residual plot shows a curved pattern.
C) The model is not appropriate, because the residual plot shows a potentially influential observation.
D) The model is not appropriate, because the residual plot indicates an outlier.
E) The model is appropriate, all the conditions for a linear regression are met.