Master Stats, Models & Finance 2025 – Ace the Exam and Unlock Your Financial Future!

Relying solely on the mean rent has the disadvantage of being skewed by extreme values, also known as outliers. When calculating the mean, all data points contribute to the total sum, meaning that a very high or very low rent value can significantly distort the average. For example, if most rents are around $1,000 per month but there are a few rents at $5,000, the mean would be pulled upwards, giving a misleading impression of the typical rent. As a result, the mean may not accurately reflect the central tendency of the data, thus failing to represent what most renters might actually experience.

While the other choices mention important statistical concepts, they do not specifically address the primary concern with the mean in this context. The variation in data does not directly negate the usefulness of the mean but indicates a need for complementary metrics, such as median or mode, which can be less affected by skew. The mean can indeed be calculated with small sample sizes, and it is typically straightforward to compute, making those reasons less relevant when discussing the disadvantages of relying solely on the mean rent.