Exhibit 17.8.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 + β₁Size + β₂Loc1 + β₃Loc2 + ε,
Model C: Price = β₀ + β₁Size + β₂Age + β₃Loc1 + β₄Loc2 + ε,
where,
Price = the price of a home (in $thousands),
Size = the square footage (in square 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.
Refer to Exhibit 17.8.Using Model C,what is the null hypothesis for testing the joint significance of the two dummy variables?

Question

Exhibit 17.8.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 + β₁Size + β₂Loc1 + β₃Loc2 + ε,
Model C: Price = β₀ + β₁Size + β₂Age + β₃Loc1 + β₄Loc2 + ε,
where,
Price = the price of a home (in $thousands),
Size = the square footage (in square 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.
Refer to Exhibit 17.8.Using Model C,what is the null hypothesis for testing the joint significance of the two dummy variables?

Quizplus · Accepted Answer

The Answer of Exhibit 17.8.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 + β₁Size + β₂Loc1 + β₃Loc2 + ε, Model C: Price = β₀ + β₁Size + β₂Age + β₃Loc1 + β₄Loc2 + ε, where, Price = the price of a home (in $thousands), Size = the square footage (in square 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. Refer to Exhibit 17.8.Using Model C,what is the null hypothesis for testing the joint significance of the two dummy variables?