Consider the following variable contained in a data set of $2,500$ observations:

Location

$1=$ Eastern U$.$S$.$

$2=$ Southeastern U$.$S$.$

$3=$ Midwest U$.$S$.$

$4=$ Southwestern U$.$S$.$

$5=$ Northwestern U$.$S$.$

The variable Location is to be used as a predictor $($or independent variable$)$ in a multiple regression. Which of the following approaches to using Location would be correct and efficient?