Exhibit 17

question 35

Essay

Exhibit 17.8.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 + β₁Size + β₂Age + ε,
Model B: Price = β₀ + β₁Size + β₂Loc1 + β₃Loc2 + ε,
Model C: Price = β₀ + β₁Size + β₂Age + β₃Loc1 + β₄Loc2 + ε,
where,
Price = the price of a home (in $thousands),
Size = the square footage (in square 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.
Refer to Exhibit 17.8.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:

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Ceramic tiles coated with a blue glaze, typically used in Islamic architecture for decorative purposes.

Administrative Center

refers to a central location or building that serves as the main hub for managing and directing the operations and activities of an organization or a government.

Sumerian City

Ancient urban centers in the region of Sumer, in southern Mesopotamia, notable for their ziggurats, early forms of writing, and as centers of early civilization.

Consumer Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.