A developer who specializes in summer cottage properties is

A developer who specializes in summer cottage properties is considering purchasing a large tract of land adjoining a lake. The current owner of the tract has already subdivided the land into separate building lots and has prepared the lots be removing some of the trees. The developer wants to forecast the value of each lot. From previous experience, she knows that the most important factors affecting the price of the lot (in $1000) are size. From a nearby area, she gathers the relevant data for 60 recently sold lots.

1. Which of the following is correct?

a.

The dependent variable is lot size and the independent variable is price of lot.

b.

The dependent variable is price of lot and the independent variable is lot size.

c.

The independent variable is lake size and the dependent variable is price.

d.

The dependent variable is price and the independent variable is lake size.

2.

The estimated slope coefficient and the estimated y-intercept are

a.

37.74 and .735

c.

1501.77 and 37.74

b.

.735 and 1501.77

d.

1.36 and 37.74

3.

Which of the following is correct?

a.

For lots that are 1000 square feet larger, the price of the lot increases by $735.

b.

For lots that are 1000 square feet larger, the price of the lot increases by $1360.

c.

For lots that are 0 square feet, the price of the lot is $37650.

d.

If the size of the nearby lake increases by 1000 square feet, the price of the lot increases by $1501.77.

Solution

1)

b.

The dependent variable is price of lot and the independent variable is lot size.

2) regression slope =cov(xy)/varx.

Mean x = 36 Mean y = 86.71

37.74 and .735

3)

c.

For lots that are 0 square feet, the price of the lot is $37650.