A Realtor Wants to Predict and Compare the Prices of Homes

question 53

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 C, define the alternative hypothesis for testing the individual significance of Age.

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Definitions:

Labor Standards

The established amount of time required to perform a specific task or job, used in planning and evaluating labor efficiency.

Particular Product

A specific item or type of product that is distinct or unique in some way from other products.

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the expected (or standard) wage.

Direct Labor Standard

A benchmark for the amount of labor time that should be consumed in the production of a good or service, used for costing and efficiency analysis.