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SCENARIO 14-6
One of the Most Common Questions of Prospective β\beta

Question 183

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SCENARIO 14-6
One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X1 ) and the amount of insulation in inches ( X 2 ) . Given below is EXCEL output of the regression model.
SCENARIO 14-6 One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X<sub>1</sub> ) and the amount of insulation in inches ( X <sub>2</sub> ) . Given below is EXCEL output of the regression model. Also SSR (X<sub>1</sub> | X<sub>2</sub>) = 8343.3572 and SSR (X<sub>2</sub> | X<sub>1</sub>) = 4199.2672 -Referring to Scenario 14-6,what is your decision and conclusion for the test H<sub>0 </sub>: \beta <sub>2</sub> = 0 vs.H<sub>1 </sub>: \beta <sub>2</sub> \neq 0 at the \alpha = 0.01 level of significance? A) Do not reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. B) Reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs. C) Reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. D) Do not reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs.
SCENARIO 14-6 One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X<sub>1</sub> ) and the amount of insulation in inches ( X <sub>2</sub> ) . Given below is EXCEL output of the regression model. Also SSR (X<sub>1</sub> | X<sub>2</sub>) = 8343.3572 and SSR (X<sub>2</sub> | X<sub>1</sub>) = 4199.2672 -Referring to Scenario 14-6,what is your decision and conclusion for the test H<sub>0 </sub>: \beta <sub>2</sub> = 0 vs.H<sub>1 </sub>: \beta <sub>2</sub> \neq 0 at the \alpha = 0.01 level of significance? A) Do not reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. B) Reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs. C) Reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. D) Do not reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs.
SCENARIO 14-6 One of the most common questions of prospective house buyers pertains to the cost of heating in dollars (Y) . To provide its customers with information on that matter, a large real estate firm used the following 2 variables to predict heating costs: the daily minimum outside temperature in degrees of Fahrenheit ( X<sub>1</sub> ) and the amount of insulation in inches ( X <sub>2</sub> ) . Given below is EXCEL output of the regression model. Also SSR (X<sub>1</sub> | X<sub>2</sub>) = 8343.3572 and SSR (X<sub>2</sub> | X<sub>1</sub>) = 4199.2672 -Referring to Scenario 14-6,what is your decision and conclusion for the test H<sub>0 </sub>: \beta <sub>2</sub> = 0 vs.H<sub>1 </sub>: \beta <sub>2</sub> \neq 0 at the \alpha = 0.01 level of significance? A) Do not reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. B) Reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs. C) Reject H<sub>0</sub> and conclude that the amount of insulation has a linear effect on heating costs. D) Do not reject H<sub>0</sub> and conclude that the amount of insulation does not have a linear effect on heating costs.
Also SSR (X1 | X2) = 8343.3572 and SSR (X2 | X1) = 4199.2672
-Referring to Scenario 14-6,what is your decision and conclusion for the test H0 : β\beta 2 = 0 vs.H1 : β\beta 2 ≠\neq 0 at the α\alpha = 0.01 level of significance?


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 linear effect on heating costs.
D) Do not reject H0 and conclude that the amount of insulation does not have a linear effect on heating costs.

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