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Practice Problems
5. I estimate a regression to determine the effect of various features on house price. log(Price) = 6.0 +0.7log(SIZE) + 0.1POOL + 0.3VIEW
PRICE = sale price of the house in $
SIZE = Size of the house in square feet
POOL = a dummy = 1 if the house has a pool and 0 otherwise
VIEW = a dummy = 1 if the house has a view and 0 otherwise.
Interpret the marginal effect of SIZE on house price.
A. A 1% increase in square footage (SIZE) is associated with a 70% increase in price holding constant the values of the other explanatory variables.
B. A 1% increase in square footage (SIZE) is associated with a 0.7% increase in price holding constant the values of the other explanatory variables.
C. A 1 unit in square footage (SIZE) is associated with a 0.7% increase in price holding constant the values of the other explanatory variables.
D. A 1 foot increase in square footage (SIZE) İs associated with a $700 increase in house price holding constant the values of the other explanatory variables.
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