1a.

Regression results:

Source | SS df MS Number of obs = 88

-------------+------------------------------ F( 3, 84) = 50.42
Model | 5.1550402 3 1.71834673 Prob > F = 0.0000
Residual | 2.86256399 84 .034078143 R-squared = 0.6430
-------------+------------------------------ Adj R-squared = 0.6302
Total | 8.0176042 87 .09215637 Root MSE = .1846

logprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]

loglotsize | .1679666 .0382812 4.39 0.000 .0918403 .2440929

logsqrft | .7002324 .0928653 7.54 0.000 .5155596 .8849051
bdrms | .0369585 .0275313 1.34 0.183 -.0177905 .0917075
_cons | 5.610714 .6512837 8.61 0.000 4.315565 6.905863

INTERPRETATION:
A one percent increase in lot size increases price by 0.16 percent, holding house
size and no. of bedrooms fixed. A one percent increase on house size increases price by
0.70 percent, holding lot size and bedrooms fixed. An extra bedroom constructed increases
price by about 3.69 percent, holding lot size and house size fixed. At 5% level of
significance, the coefficients of llotsize and lsqrft are significantly different from
zero, while the coefficient of bdrms is insignificant (at least in the 10% level).

1b. log(price) = 5.610714 + 0.1679666log(lotsize) + 0.7002324log(sqrft) +

0.0369585(bdrms)
log(price) = 5.610714 + 0.1679666log(20,000) + 0.7002324log(2,500) + 0.0369585(4)
log(price) = 5.610714 + 1.663455 + 5.478651 + 0.147834
log(price) = 12.900654

1c. exp[log(price)] = exp(12.9007)

price = $ 400, 574.08

1d. I prefer the first model which uses log, because usually price, which is
expressed in dollar amount, takes on the log form. Lotsize and sqrft are variables
which take on large values, so it is practical to use the log form with them.
Meanwhile bdrms can take the level form because it takes on smaller values and
interpretation of unit changes is easier to use in this variable.

1e. 54th house

Price = 180,000; lotsize = 6017; sqrft = 1812; bdrms = 3
95% confidence interval: θhat ± 1.96·se(θhat)

Regression results (level model):

Source | SS df MS Number of obs = 88

-------------+------------------------------ F( 3, 84) = 57.46
Model | 6.1713e+11 3 2.0571e+11 Prob > F = 0.0000
Residual | 3.0072e+11 84 3.5800e+09 R-squared = 0.6724
-------------+------------------------------ Adj R-squared = 0.6607
Total | 9.1785e+11 87 1.0550e+10 Root MSE = 59833

price | Coef. Std. Err. t P>|t| [95% Conf. Interval]

-----------------------------------------------------------------------------

lotsize | 2.067707 .6421258 3.22 0.002 .790769 3.344644

sqrft | 122.7782 13.23741 9.28 0.000 96.45415 149.1022
bdrms | 13852.52 9010.145 1.54 0.128 -4065.14 31770.18
 _cons | -21770.31 29475.04 -0.74 0.462 -80384.66 36844.04

price = -21770.31 + 2.067707(6017) + 122.7782(1812) + 13852.52(3)

= $254,702.74
The house is underpriced.

Regression results (using lotsize-6017, etc.)

Source | SS df MS Number of obs = 88

-------------+------------------------------ F( 3, 84) = 57.46
Model | 6.1713e+11 3 2.0571e+11 Prob > F = 0.0000
Residual | 3.0072e+11 84 3.5800e+09 R-squared = 0.6724
-------------+------------------------------ Adj R-squared = 0.6607
Total | 9.1785e+11 87 1.0550e+10 Root MSE = 59833

price | Coef. Std. Err. t P>|t| [95% Conf. Interval]

newlotsize | 2.067707 .6421258 3.22 0.002 .790769 3.344644

newsqrft | 122.7782 13.23741 9.28 0.000 96.45415 149.1022
newbdrms | 13852.52 9010.145 1.54 0.128 -4065.14 31770.18
_cons | 254702.7 7825.49 32.55 0.000 239140.9 270264.6

95% confidence interval: θhat ± 1.96·se(θhat)

Θhat = 254,702.7, se(θhat) = 7825.49
95% confidence interval: 254,702.7 ± 1.96·(7825.49)
95% confidence interval: 239,364.74 ‹ Θ0 ‹ 270,040.66

1f. 95% confidence interval: y0hat ± 1.96·se(e0hat)

se(e0hat)= {[se(y0hat)]2 + σ2hat}1/2
se(e0hat)= {(7825.49)2 + (59833)2}1/2
se(e0hat)= 60,342.57
y0hat ± 1.96·se(e0hat) = 136,431.26 ‹ price0 ‹ 372,974.14

2a. Regression results:

Source | SS df MS Number of obs = 88
-------------+------------------------------ F( 3, 84) = 50.42
Model | 5.1550402 3 1.71834673 Prob > F = 0.0000
Residual | 2.86256399 84 .034078143 R-squared = 0.6430
-------------+------------------------------ Adj R-squared = 0.6302
Total | 8.0176042 87 .09215637 Root MSE = .1846

logprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]

loglotsize | .1679666 .0382812 4.39 0.000 .0918403 .2440929

logsqrft | .7002324 .0928653 7.54 0.000 .5155596 .8849051
bdrms | .0369585 .0275313 1.34 0.183 -.0177905 .0917075
_cons | 5.610714 .6512837 8.61 0.000 4.315565 6.905863

Regression Results (using auxiliary regression):

Source | SS df MS Number of obs = 88
-------------+------------------------------ F( 9, 78) = 1.05
Model | .051148253 9 .005683139 Prob > F = 0.4053
Residual | .420189363 78 .005387043 R-squared = 0.1085
-------------+------------------------------ Adj R-squared = 0.0057
Total | .471337615 87 .005417674 Root MSE = .0734
 u_hat2 | Coef. Std. Err. t P>|t| [95% Conf. Interval]

loglotsize | -1.272839 .7082545 -1.80 0.076 -2.682866 .137187

logsqrft | -1.7568 1.664947 -1.06 0.295 -5.071455 1.557855
bdrms | .287872 .284522 1.01 0.315 -.2785678 .8543118
a4 | .0235206 .0162958 1.44 0.153 -.0089218 .055963
a5 | .0402746 .1230734 0.33 0.744 -.2047457 .2852949
a6 | -.0050909 .0090558 -0.56 0.576 -.0231196 .0129378
a7 | .120861 .0721295 1.68 0.098 -.0227378 .2644598
a8 | -.025276 .0320631 -0.79 0.433 -.0891087 .0385567
a9 | -.0010946 .0482469 -0.02 0.982 -.0971467 .0949575
_cons | 12.20708 6.692663 1.82 0.072 -1.116988 25.53115

Use LM Statistic.
LM Stat = n*R2uhat = 88*0.1805 = 15.884
At 95% level of significance, X2(9) = 16.92
Since LM Stat < X2, then the model shows no heteroskedasticity (variance of error is
constant for all levels of the independent variables).

2b. Regression results (level model):

Source | SS df MS Number of obs = 88

-------------+------------------------------ F( 3, 84) = 57.46
Model | 6.1713e+11 3 2.0571e+11 Prob > F = 0.0000
Residual | 3.0072e+11 84 3.5800e+09 R-squared = 0.6724
-------------+------------------------------ Adj R-squared = 0.6607
Total | 9.1785e+11 87 1.0550e+10 Root MSE = 59833

price | Coef. Std. Err. t P>|t| [95% Conf. Interval]

lotsize | 2.067707 .6421258 3.22 0.002 .790769 3.344644

sqrft | 122.7782 13.23741 9.28 0.000 96.45415 149.1022
bdrms | 13852.52 9010.145 1.54 0.128 -4065.14 31770.18
_cons | -21770.31 29475.04 -0.74 0.462 -80384.66 36844.04

Regression results (using auxiliary regression):

Source | SS df MS Number of obs = 88
-------------+------------------------------ F( 9, 78) = 5.39
Model | 1.6784e+21 9 1.8649e+20 Prob > F = 0.0000
Residual | 2.7003e+21 78 3.4619e+19 R-squared = 0.3833
-------------+------------------------------ Adj R-squared = 0.3122
Total | 4.3787e+21 87 5.0330e+19 Root MSE = 5.9e+09

u_hatlevel2 | Coef. Std. Err. t P>|t| [95% Conf. Interval]

lotsize | -1859507 637097 -2.92 0.005 -3127870 -591144.3

sqrft | -2673917 8662183 -0.31 0.758 -1.99e+07 1.46e+07
bdrms | -1.98e+09 5.44e+09 -0.36 0.716 -1.28e+10 8.84e+09
b4 | -.4978377 4.631155 -0.11 0.915 -9.717759 8.722083
b5 | 352.2547 1839.603 0.19 0.849 -3310.113 4014.623
b6 | 2.90e+08 7.59e+08 0.38 0.704 -1.22e+09 1.80e+09
b7 | 456.7786 276.8903 1.65 0.103 -94.46774 1008.025
b8 | 314646.8 252093.6 1.25 0.216 -187233 816526.7
b9 | -1020860 1667154 -0.61 0.542 -4339909 2298189
_cons | 1.56e+10 1.14e+10 1.37 0.173 -7.01e+09 3.83e+10

LM stat: n*R2uhat = 88*0.3833

At 95% level of significance, X2(9) = 16.92
Since the LM stat is large enough to reject the null hypothesis of homoskedasticity,
there is observed heteroskedasticity on the level model. It is actually eliminated
when the log model is chosen.

2c. Regression results (log model):

Source | SS df MS Number of obs = 88

-------------+------------------------------ F( 3, 84) = 50.42
Model | 5.1550402 3 1.71834673 Prob > F = 0.0000
Residual | 2.86256399 84 .034078143 R-squared = 0.6430
-------------+------------------------------ Adj R-squared = 0.6302
Total | 8.0176042 87 .09215637 Root MSE = .1846

logprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]

loglotsize | .1679666 .0382812 4.39 0.000 .0918403 .2440929

logsqrft | .7002324 .0928653 7.54 0.000 .5155596 .8849051
bdrms | .0369585 .0275313 1.34 0.183 -.0177905 .0917075
_cons | 5.610714 .6512837 8.61 0.000 4.315565 6.905863

With robust standard errors:

Linear regression Number of obs = 88
F( 3, 84) = 49.32
Prob > F = 0.0000
R-squared = 0.6430
Root MSE = .1846

| Robust
logprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]

loglotsize | .1679666 .0414734 4.05 0.000 .0854922 .2504411

logsqrft | .7002324 .1038288 6.74 0.000 .4937575 .9067072
bdrms | .0369585 .0306011 1.21 0.231 -.0238952 .0978121
_cons | 5.610714 .7813144 7.18 0.000 4.056985 7.164443

All the standard errors of the coefficients increased, thus lowering the t-statistic,
Still, loglotsize and logsqrft remain statistically significant while the p-value of
the coefficient of bdrms actually increased, making it more statistically
insignificant (can only be rejected at 77% level of significance).