Quantitative Business Analysis (QBA) Exam 3 Practice Test

Which statement about the ROC Curve best reflects model performance?

The 45-degree line indicates perfect prediction. The closer the ROC curve hugs the upper left corner, the better the model predicts. The y-axis represents specificity. The x-axis represents sensitivity.

Correct Answer:

The x-axis represents sensitivity.

Explanation:

The ROC curve shows how the true positive rate (sensitivity) changes as you vary the false positive rate (which is 1 minus specificity). A model that discriminates well will have a curve that sits toward the top-left of the plot, meaning you can achieve a high true positive rate with a low false positive rate. Key points to keep straight: the y-axis is sensitivity (true positive rate), not specificity; the x-axis is the false positive rate (1 − specificity), not sensitivity; and the 45-degree line represents random guessing, not perfect prediction. So the best reflection of strong performance is the curve hugging the upper-left corner, indicating high sensitivity with few false positives.

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