A Realtor Wants to Predict and Compare the Prices of Homes

question 37

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 + β₁Size + β₂Age + ε
Model B: Price = β₀ + β₁ Size + β₃ Loc1 + β₄ Loc2 + ε
Model C: Price = β₀ + β₁Size + β₂Age + 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:

Discriminatory Language

Language or phrasing that makes unfair distinctions or shows prejudice against individuals or groups based on personal characteristics such as race, gender, or age.

Bias Avoidance

Efforts to recognize, reduce, and remove personal and systemic biases in decision-making processes or information presentation.

Fiscal Year

A twelve-month period used for accounting purposes and preparing financial statements, which may or may not align with the calendar year.

Capital Equipment

Large, long-term investments in goods or machinery used by a business to produce goods or services.