Foreign is a dummy variable that is zero for domestic cars and one for foreign.
ID: 3321027 • Letter: F
Question
Foreign is a dummy variable that is zero for domestic cars and one for foreign.
reg price length foreign
price | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
length | 90.21239 15.83368 5.70 0.000 58.64092 121.7839
foreign | 2801.143 766.117 3.66 0.000 1273.549 4328.737
_cons | -11621.35 3124.436 -3.72 0.000 -17851.3 -5391.401
1.The addition of the foreign dummy materially changed the coefficient on length. What does that tell you?
2.The average length of a domestic car is 196.13. The average length of a foreign car is 168.55. What is the expected price of a domestic car and for a foreign car based on the output above?
Explanation / Answer
Answer:
Foreign is a dummy variable that is zero for domestic cars and one for foreign.
reg price length foreign
price | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
length | 90.21239 15.83368 5.70 0.000 58.64092 121.7839
foreign | 2801.143 766.117 3.66 0.000 1273.549 4328.737
_cons | -11621.35 3124.436 -3.72 0.000 -17851.3 -5391.401
1.The addition of the foreign dummy materially changed the coefficient on length. What does that tell you?
price of foreign car increases by 2801.143 more than the domestic car for the same length.
2.The average length of a domestic car is 196.13. The average length of a foreign car is 168.55. What is the expected price of a domestic car and for a foreign car based on the output above?
The regression line is price = -11621.35 +2801.143*foreign + 90.21239 *length
expected price of a domestic car =-11621.35+2801.143*0+90.21239*196.13
=6072.00
expected price of a foreign car =-11621.35+2801.143*1+90.21239*168.55
=6385.09