A contractor built 30 similar homes in a suburban developmen

A contractor built 30 similar homes in a suburban development. The homes have comparable size and amenities, but each has been sold with features that customize the appearance, landscape, and interior. The contractor expects the homes to sell for about $500,000. He expects that one-third of the homes will sell either for less than $450,000 or more than $550,000.

(a) Would a normal model be appropriate to describe the distribution of sale prices?

A. No. Since each home has different features that customize the appearance, landscape, and interior, the prices of the homes will vary greatly.

B. No. The price of each is the overall average plus various factors that increase and decrease the value of each.

C. Yes. The price of each is the overall average plus various factors that increase and decrease the value of each.

D. Yes. Since each home has different features that customize the appearance, landscape, and interior, the prices of the homes will vary greatly.

(b) What data would help you decide if a normal model is appropriate?

A. The number of homes previously built by this contractor with similar characteristics

B. Sales data from housing projects recently built by this contractor with similar characteristics

C. The average construction cost for each of the 30 homes

(c) What normal model has properties that are consistent with the intuition of the contractor?

A. Normal model with mean $500,000 and SD $100,000

B. Normal model with mean $450,000 and SD $100,000

C. Normal model with mean $500,000 and SD $50,000

D. Normal model with mean $450,000 and SD $50,000

Solution

a. C is the answer

b. B is the answer

c. C is the answer.