In a Multiple Regression, the Dependent Variable Is House Value

question 120

Multiple Choice

In a multiple regression, the dependent variable is house value (in '000$) and one of the independent variables is a dummy variable, which is defined as 1 if a house has a garage and 0 if not. The coefficient of the dummy variable is found to be 5.4 but the t-test reveals that it is not significant at the 0.05 level. Which of the following is true?

• A) A garage increases the house value by $5,400.
• B) A garage increases the house value by $5,400, holding all other independent variables constant.
• C) The house value remains the same with or without a garage.
• D) We need to include other dummy variables.

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Definitions:

Product Demand

The desire or need for a specific product or service combined with the capacity to purchase it.

Revenues

The income received by a business from its various activities, typically from the sale of goods and services to customers.

Financing Cost

The total expense incurred to finance a purchase or project, including interest, fees, and other charges associated with borrowing money.