A Realtor Wants to Predict and Compare the Prices of Homes

question 96

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

---

Definitions:

Intense Competition

A market situation characterized by a high level of rivalry among businesses, often leading to innovations and lower prices for consumers.

Entry-Restricting Legal Barriers

Regulations and legal requirements that limit the ability of new competitors to enter an industry.

Monopoly Cartel

A collaboration of independent businesses formed to control production, sales, and prices of goods within a market, behaving similarly to a single monopoly.

Funeral Home Industry

A sector of the economy that provides services related to the preparation, management, and coordination of funerals.