TABLE 14-6 One of the Most Common Questions of Prospective House Buyers

Multiple Choice

TABLE 14-6
One of the most common questions of prospective house buyers pertains to the average cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit (X₁) , the amount of insulation in inches (X₂) , the number of windows in the house (X₃) , and the age of the furnace in years (X₄) . Given below are the EXCEL outputs of two regression models.
Model 1
Note: 2.96869E-05 = 2.96869×10^-5
Model 2
Note: 2.9036E-06 = 2.9036×10^-6
-Referring to Table 14-6, what is your decision and conclusion for the test H₀ : β₂ = 0 vs. H₀ : β₂ < 0 at the α = 0.01 level of significance using Model 1?

A) Do not reject H₀ and conclude that the amount of insulation has a linear effect on heating costs.
B) Reject H₀ and conclude that the amount of insulation does not have a linear effect on heating costs.
C) Reject H₀ and conclude that the amount of insulation has a negative linear effect on heating costs.
D) Do not reject H₀ and conclude that the amount of insulation has a negative linear effect on heating costs.