Question

A wireless phone service provider advertises that their average startup fee is $73. Given that their startup fees are $8, $85, $92, and $107, why is this statistic misleading?

Answer 1

Answer:

The reason why it is statisticaly misleading is because, while it is true that the average fee is $73 (the median value in statistical terms), averages are a statistical measure that is very sensitive to extreme values.

That is to say, if a value is very high, or very low, the statistical mean will be biased.

We can see this in the question. Three values are higher than the average, and relatively close: $85, $92, and $107. The third value, however, is way lower, at only $8. This extreme low value alters the median value, making it biased and misleading.