Which of the following statements are accurate about the population regression model? (a) u_i is the stochastic component of Yi.
(b) a^ + B^Xi is the systematic component of Yi.
(c) Both (a) and (b) are correct.
(d) Neither (a) nor (b) are correct.

Option (A) is the only accurate statement about a population regression model.

Explanation:

Option A is the only correct answer because ui is the stochastic component of Yi.

On the other hand, option B is incorrect. It would only be correct for a sample regression model. This is because alpha (α) and beta (β) have hats or caps on them. The hat shows that they are estimated values (estimated from the given/measured population values for Y and X).

In this duo-variable (two-variable) regression model, ui without a cap is the stochastic component of Yi.

option (c) $7,400

Explanation:

Given:

Credit balance of Allowance for bad debts account = $2000

Uncollectible Net credit sales = 2%

Net credit sales = $270,000

Now,

The Amount of Uncollectible Net credit sales = 2% of Net credit sales

or

The Amount of Uncollectible Net credit sales = 0.02 ×  $270,000 = $5,400

Therefore,

the balance of Allowance for Bad Debts = $2,000 + $5,400 = $7,400

Hence, the correct answer is option (c) $7,400