TABLE 13-10
You worked as an intern at We Always Win Car Insurance Company last summer. You noticed that individual car insurance premiums depend very much on the age of the individual, the number of traffic tickets received by the individual, and the population density of the city in which the individual lives. You performed a regression analysis in Microsoft Excel and obtained the following information:

-A dummy variable is used as an independent variable in a regression model when
A) the variable involved is numerical.
B) the variable involved is categorical.
C) a curvilinear relationship is suspected.
D) when two independent variables interact.

Question

TABLE 13-10
You worked as an intern at We Always Win Car Insurance Company last summer. You noticed that individual car insurance premiums depend very much on the age of the individual, the number of traffic tickets received by the individual, and the population density of the city in which the individual lives. You performed a regression analysis in Microsoft Excel and obtained the following information:
 
-A dummy variable is used as an independent variable in a regression model when
A) the variable involved is numerical. 
B) the variable involved is categorical. 
C) a curvilinear relationship is suspected. 
D) when two independent variables interact.

Quizplus · Accepted Answer

A dummy variable is used to represent categorical variables in a regression model. In this case, it could be used to represent a binary variable such as gender or a variable with multiple categories such as type of car.

TABLE 13-10 You Worked as an Intern at We Always Win Car