We modeled the price of a car using its MPG and its manufacturing site (foreign

Question

We modeled the price of a car using its MPG and its manufacturing site (foreign or domestic). The regression output is provided below. Note that domestic is the reference level for manufacturing site, and that the data is somewhat old so the prices may seem too low for today's prices. What is the predicted price of a foreign car that gets 26 miles per gallon? Coef. Std. Err. t P(t>tl) interkept 11905 mpg -294 site:foreign 1767 1159 10.27 55 -5.35 700 2.52 0.000 0.000 0.014 ? 6028 04261 19549 21316 Box 1: Select the best answer

Explanation / Answer

For foreign = 1 and mpg = 26:

Predicted price = 11905 - 294*26 + 1767*1 = 6028

Option A is correct.

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