When a categorical variable has 5 levels,________ dummy variables need to be added to the model.

A) 5
B) 0
C) 4
D) 2

When a categorical variable has k levels, k-1 dummy variables need to be added to the model to avoid perfect multicollinearity, where k is the number of levels of the variable. In this case, a categorical variable with 5 levels would require 5-1=4 dummy variables to be added to the model. Therefore, the correct answer is C) 4.