A Realtor Wants to Predict and Compare the Prices of Homes

question 86

Short Answer

A realtor wants to predict and compare the prices of homes in three neighboring locations. She considers the following linear models:
Model A: Price = β₀ + β₁ Size + β₂ Age + ε
Model B: Price = β₀ + β₁ Size + β₃ Loc1 + β₄ Loc2 + ε
Model C: Price = β₀ + β₁ Size + β₂ Age + β₃ Loc1 + β₄ Loc2 + ε
where,
Price = the price of a home (in $1,000s)
Size = the square footage (in sq. feet)
Loc1 = a dummy variable taking on 1 for Location 1, and 0 otherwise
Loc2 = a dummy variable taking on 1 for Location 2, and 0 otherwise
After collecting data on 52 sales and applying regression, her findings were summarized in the following table. Note: The values of relevant test statistics are shown in parentheses below the estimated coefficients.
Using Model B, compute the test statistic for testing the joint significance of the two dummy variables Loc1 and Loc2.

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Definitions:

Susto

A cultural illness primarily found in Latin American communities, characterized by chronic somatic suffering stemming from a traumatic event perceived as frightening.

Institutionalized Racism

Systemic policies, practices, or procedures in societal institutions that disadvantage certain racial groups.

Health Care Provision

The offering of health services by professionals to patients, including medical treatment and care.

Cultural Relativism

The principle that an individual's beliefs and activities should be understood by others in terms of that individual's own culture.