Questions #6-12 6. In a model predicting the price of a used car, you want to al

Question

Questions #6-12

6. In a model predicting the price of a used car, you want to allow for the age of a car to affect the predicted price in a non-linear way. To do this you need to include an interaction term in your regression equation. The linear probability model never gives predicted values of the dependent variable that are greater than 1 7. The critical value for a one-sided t test at the 5% level with 5 degrees of freedom in greater than the critical value for a two-sided t test at the 5% level with 30 degrees of freedom. 8. An interaction term allows the effect of one independent variable to vary depending on the value of a different independent variable. 9. 10. The following equation is estimated)-A + + If 1 > 0 and 2 > 0 the graph of y versus x could look like this: 2 11. The following equation is estimated: + + IfBi 0 and B 0 and

Explanation / Answer

I guess these are true false questions

6
False , in order to do so , you must include a power term for age , such as square of age this would capture the effect of age in a non linear way .

7
True , the probability model results in the value that lie between 0 and 1 . We must code the output variable in the form of 0 and 1

8
we can check this quickly from the t table as

t-value (right-tail):   2.015 for df = 5 and alpha = 0.05

t-value (two-tailed):   +/- 2.04 for df = 30 and level = 0.05

hence false

9
True , the interaction effect captures the one effect of independent variable to vary dependeing on other variable as the interaction term is the product of the 2 independent variables
such as

age*price

Please note that we can answer only 4 subaprts of a question at a time

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