Question 1

Demand equations derived from actual market data are

Accepted Answer

A)  empirical demand functions. 
B)  never estimated using consumer interviews. 
C)  generally estimated using regression analysis. 
D)  both a and c 
E)  all of the above 
A)  empirical demand functions. 
B)  never estimated using consumer interviews. 
C)  generally estimated using regression analysis. 
D)  both a and c 
E)  all of the above

Question 2

Refer to the following:
The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm:

$Q = a + b P + c M + d P _ { R }$ 
where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and
 $P _ { R }$ is the price of a related product. The results of the estimation are presented below:
 $\begin{array}{rllll}
\text { DEPENDENT VARIABLE: } & Q & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUEONF } \
\text { OBSERVATIONS: } 32 & 0.7984 & 36.14 & 0.0001\\
\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & & \
& \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT }  & 846.30 & 76.70 & 11.03 & 0.0001 \
\text { P } & -8.60 & 2.60 & -3.31 & 0.0026 \
\text { M } & 0.0184 & 0.0048 & 3.83 & 0.0007 \
\text { PR }& -4.3075 & 1.230 & -3.50 & 0.0016
\end{array}$ 
For the next 2 questions suppose income remains at $10,000 but the price of the related good increases to $60 and Conlan decides to raise the price of its product to $50.
-At the prices and income given above, Conlan can expect to sell _________units.

Accepted Answer

A)  342 
B)  600 
C)  724 
D)  864 
E)  872 
A)  342 
B)  600 
C)  724 
D)  864 
E)  872

Question 3

Refer to the following:
The estimated demand for a good is

$\hat { Q } = 4,800 - 16 P - 0.65 M - 1.5 P _ { R }$ 
where Q is the quantity demanded of the good, P is the price of the good, M is income, and
 $P _ { R }$ is the price of related good R.
-If income decreases by $2,000, all else constant, quantity demanded will ________ by _________ units.

Accepted Answer

A)  increase; 1.30 units 
B)  decrease; 6.5 units 
C)  increase; 1,300 units 
D)  decrease; 65 units 
A)  increase; 1.30 units 
B)  decrease; 6.5 units 
C)  increase; 1,300 units 
D)  decrease; 65 units

Question 4

Refer to the following:
A consulting firm estimates the following quarterly sales forecasting model:
 $Q _ { t } = a + b t + c D$ 
The equation is estimated using quarterly data from 2003I-2013III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:
D = 1 in the second quarter, and 0 otherwise.
The results of the estimation are:
 $\begin{array}{rllll}
\text { DEPENDENT VARIABLE: } & \text { QT } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ONF } \
\text { OBSERVATIONS: } & 43 & 0.8644 & 127.5 & 0.0001\\
\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & \
&\text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & 22.5 & 9.32 & 2.41 & 0.0201 \
\text { T } & 1.86 & 0.55 & 3.38 & 0.0016 \
\text { D } & 2.0 & 0.71 & 2.82 & 0.0075
\end{array}$
-At  the 1 percent level of significance, is there a statistically significant trend in sales?

Accepted Answer

A)  Yes, because 0.0016  0.01. 
D)  Yes, because 1.86 > 0.01. 
E)  both c and d 
A)  Yes, because 0.0016  0.01. 
D)  Yes, because 1.86 > 0.01. 
E)  both c and d

Question 5

Refer to the following:
A consulting firm estimates the following quarterly sales forecasting model:
 $Q _ { t } = a + b t + c D$ 
The equation is estimated using quarterly data from 2003I-2013III (t = 1,..., 43). The variable D is a dummy variable for the second quarter where:
D = 1 in the second quarter, and 0 otherwise.
The results of the estimation are:
 $\begin{array}{rllll}
\text { DEPENDENT VARIABLE: } & \text { QT } & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUE ONF } \
\text { OBSERVATIONS: } & 43 & 0.8644 & 127.5 & 0.0001\\
\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & \
&\text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT } & 22.5 & 9.32 & 2.41 & 0.0201 \
\text { T } & 1.86 & 0.55 & 3.38 & 0.0016 \
\text { D } & 2.0 & 0.71 & 2.82 & 0.0075
\end{array}$
-What is the estimated intercept of the trend line in the third quarter?

Accepted Answer

A)  22.50 
B)  24.50 
C)  24.36 
D)  2.00 
E)  none of the above 
A)  22.50 
B)  24.50 
C)  24.36 
D)  2.00 
E)  none of the above

Question 6

Refer to the following:
The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm:
 $Q = a + b P + c M + d P _ { R }$ 
where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and
 $P _ { R }$ is the price of a related product. The results of the estimation are presented below:
 $\begin{array}{rllll}
\text { DEPENDENT VARIABLE: } & Q & \text { R-SQUARE } & \text { F-RATIO } & \text { P-VALUEONF } \
\text { OBSERVATIONS: } 32 & 0.7984 & 36.14 & 0.0001\\
\text { VARIABLE } & \text { PARAMETER } & \text { STANDARD } & & \
& \text { ESTIMATE } & \text { ERROR } & \text { T-RATIO } & \text { P-VALUE } \
\text { INTERCEPT }  & 846.30 & 76.70 & 11.03 & 0.0001 \
\text { P } & -8.60 & 2.60 & -3.31 & 0.0026 \
\text { M } & 0.0184 & 0.0048 & 3.83 & 0.0007 \
\text { PR }& -4.3075 & 1.230 & -3.50 & 0.0016
\end{array}$ 
Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30.
-At the prices and income given above, what is the income elasticity?

Accepted Answer

A)  -1.62 
B) -0.87 
C)  0.21 
D)  0.31 
E)  1.50 
A)  -1.62 
B) -0.87 
C)  0.21 
D)  0.31 
E)  1.50

Question 7

Refer to the following:
The estimated demand for a good is

$$\hat { Q } = 25 - 5 P + 0.32 M + 12 P _ { R }$$ 
where Q is the quantity demanded of the good, P is the price of the good, M is income, and
 $P _ { R }$ is the price of related good R.
-The good and the related good R are

Accepted Answer

A)  complements since the coefficient on M is positive. 
B)  substitutes since the coefficient on M is positive. 
C)  complements since the coefficient on $P _ { R }$ is positive. 
D)  substitutes since the coefficient on $P _ { R }$ is positive. 
A)  complements since the coefficient on M is positive. 
B)  substitutes since the coefficient on M is positive. 
C)  complements since the coefficient on $P _ { R }$ is positive. 
D)  substitutes since the coefficient on $P _ { R }$ is positive.

Demand equations derived from actual market data are

Refer to the following: The estimated demand for a good is $\hat { Q } = 25 - 5 P + 0.32 M + 12 P _ { R }$ where Q is the quantity demanded of the good, P is the price of the good, M is income, and $P _ { R }$ is the price of related good R. -The good and the related good R are

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters

Exam 7: Demand Estimation and Forecasting

Demand equations derived from actual market data are

Managers, Profits, and Markets

Demand, Supply, and Market Equilibrium

Marginal Analysis for Optimal Decisions

Basic Estimation Techniques

Theory of Consumer Behavior

Elasticity and Demand

Production and Cost in the Short Run

Production and Cost in the Long Run

Production and Cost Estimation

Managerial Decisions in Competitive Markets

Managerial Decisions for Firms With Market Power

Strategic Decision Making in Oligopoly Markets

Advanced Pricing Techniques

Decisions Under Risk and Uncertainty

Government Regulation of Business

Filters