Exhibit 17.1.A researcher has developed the following regression equation to predict the prices of luxurious Oceanside condominium units, , where
Price = the price of a unit (in $thousands),
Size = the square footage (in square feet),
View = a dummy variable taking on 1 for an ocean view unit,and 0 for a bay view unit.
Refer to Exhibit 17.1.What is the predicted price of a bay view unit measuring 1500 square feet?
A)$315,000
B)$2,650,000
C)$265,000
D)$225,000

Question

Exhibit 17.1.A researcher has developed the following regression equation to predict the prices of luxurious Oceanside condominium units,  , where
Price = the price of a unit (in $thousands),
Size = the square footage (in square feet),
View = a dummy variable taking on 1 for an ocean view unit,and 0 for a bay view unit.
Refer to Exhibit 17.1.What is the predicted price of a bay view unit measuring 1500 square feet?
A)$315,000 
B)$2,650,000 
C)$265,000 
D)$225,000

Quizplus · Accepted Answer

The regression equation is: 
Price = 125 + 0.25(Size) + 100(View)

For a bay view unit (View=0) measuring 1500 square feet (Size=1500), the predicted price is: 
Price = 125 + 0.25(1500) + 100(0) = $ 265,000 (in thousands of dollars)

Therefore, the best choice is C.