A regression equation that predicts the price of homes in thousands of dollars is t = 24.6 + 0.055x1 - 3.6x2, where x2 is a dummy variable that represents whether the house in on a busy street or not. Here x2 = 1 means the house is on a busy street and x2 = 0 means it is not. Based on this information, which of the following statements is true?
A) On average, homes that are on busy streets are worth $3600 less than homes that are not on busy streets.
B) On average, homes that are on busy streets are worth $3.6 less than homes that are not on busy streets.
C) On average, homes that are on busy streets are worth $3600 more than homes that are not on busy streets.
D) On average, homes that are on busy streets are worth $3.6 more than homes that are not on busy streets.

Question

Quizplus · Accepted Answer

The coefficient for x2 is -3.6, indicating that homes on busy streets are, on average, worth $3,600 less than homes not on busy streets, since the regression equation predicts the price in thousands of dollars.

A Regression Equation That Predicts the Price of Homes in Thousands