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1. Suppose we wish to know the effects of pollution and crime rates on housing prices, and plan to run the following regression using OLS:

Here is the question, is you have any further concern, just let me know. Screen Shot 2018-08-06 at 4.50.34 PM.pngScreen Shot 2018-08-06 at 4.50.41 PM.png

Screen Shot 2018-08-06 at 4.50.34 PM.png

1. Suppose we wish to know the effects of pollution and crime rates on housing prices, and plan to run the following regression using OLS:
(W)=BO+BI10g(n0x,)+[32r00msi+[33(r00ms,)2+64crimei+55roomsi>l<crimei+u ,— Where nox is a measure of nitrogen oxide in the air over the community, rooms is the number of bedrooms in the house, and crime is the reported number of
crimes per capita. a) What is the partial effect of rooms on log(price)? (2) b) Assume B5 =0, fi<0, & [33 >0 graph the relationship between rooms and
log(price). (3)

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0) Are there any turning points in the relationship between rooms and log
(price)? If so, algebraically show at what point (rooms) this turning point
occurs. (2) (1) Now suppose B5¢0,& [5320. Interpret the parameter [35 What theoretical
reasons might one have for including the interaction term rooms*crime?(4)

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