A Realtor Wants to Predict and Compare the Prices of Homes

question 81

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 predicted price of a 2,500-square-foot home in Location 1.

---

Definitions:

Judicial Activism

The practice where judges make rulings based on personal or political considerations rather than on existing law, often leading to decisions that enact new policies.

Judicial Restraint

A philosophy where judges play a minimal policymaking role, interpreting the Constitution and laws strictly and deferring to the legislative and executive branches.

Certiorari Pool

A system used by the Supreme Court justices to review petitions for writs of certiorari, where law clerks screen cases and recommend whether they should be heard.

Supreme Court Law Clerks

Highly qualified young attorneys who assist Supreme Court Justices by conducting legal research, drafting opinions, and performing various clerical tasks.