A study collected data on the 15 best-selling fiction and 15 best-selling nonfiction hardcover books (according to the New York Times bestseller list): Y = price, X₁ =

number of pages, and X₂ = category (0 if fiction, 1 if nonfiction). The standard errors are in parentheses and the t values are in brackets.

This equation was then estimated, where X₃ = X₁X₂:

a. Explain the conceptual difference between these two models, using the parameter estimates to illustrate your reasoning.

b. Using the second equation, what is the predicted price of a 300-page nonfiction book?

c. The t values are for testing the null hypothesis that the coefficients equal 0. Use the second equation to test the null hypothesis that the coefficient of X₁ is 0.05.
What is the alternative hypothesis?

Transcribed Image Text:

Y=15.89 +0.022X +0.290X2, R = 0.59 (1.27) (0.0035) (0.071) [12.73] [6.20] [0.41]