A Realtor Wants to Predict and Compare the Prices of Homes

question 13

Essay

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 C, what is the conclusion for testing the joint significance of the two dummy variables at the 1% significance level?

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Definitions:

Horizontal Axis

In graphing, the horizontal line along which the values of one variable are plotted, often representing the independent variable or time.

Multiply Controlled Behaviors

A term used to describe a behavior serving different purposes for a student (e.g., making animal noises to escape a boring task and to get attention from peers).

Transfer of Function

The process by which a response or behavior developed in one context becomes applicable or relevant in another context.

Experimental Control

The rigorous management of variables in an experiment to ensure that the results can be reliably attributed to the variable being tested, rather than to extraneous factors.