Question 1

A vertical demand curve

Accepted Answer

A) is impossible. 
B) reasonably represents demand for essential goods. 
C) has a price elasticity of negative infinity since people will pay an infinite amount for the good. 
D) represents a normal good. 
A) is impossible. 
B) reasonably represents demand for essential goods. 
C) has a price elasticity of negative infinity since people will pay an infinite amount for the good. 
D) represents a normal good.

Question 2

If the price elasticity of demand for a good is less than one in absolute value, economists characterize that demand is

Accepted Answer

A) elastic. 
B) inelastic. 
C) perfect. 
D) vertical. 
A) elastic. 
B) inelastic. 
C) perfect. 
D) vertical.

Question 3

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

Accepted Answer

A) -1.25. 
B) elastic. 
C) Both A and B above. 
D) Neither A nor B above. 
A) -1.25. 
B) elastic. 
C) Both A and B above. 
D) Neither A nor B above.

Question 4

If it is difficult to substitute for a good in the short run, but easy in the long run, then

Accepted Answer

A) the elasticity of demand is more elastic in the short run. 
B) the elasticity of demand is more elastic in the long run. 
C) the good is an inferior good. 
D) elasticity changes along the demand curve. 
A) the elasticity of demand is more elastic in the short run. 
B) the elasticity of demand is more elastic in the long run. 
C) the good is an inferior good. 
D) elasticity changes along the demand curve.

Question 5

If the demand curve is given by Q = a + bp, then a is

Accepted Answer

A) negative. 
B) the quantity demanded when price is zero. 
C) the slope of the demand curve. 
D) measured in money. 
A) negative. 
B) the quantity demanded when price is zero. 
C) the slope of the demand curve. 
D) measured in money.

Question 6

The market demand for wheat is Q = 100 - 2p + 1pb, where pb is the price of barley. The cross price elasticity of demand for wheat with respect to barley

Accepted Answer

A) cannot be calculated from just the information provided. 
B) is negative. 
C) suggests that wheat and barley are complements. 
D) equals 1. 
A) cannot be calculated from just the information provided. 
B) is negative. 
C) suggests that wheat and barley are complements. 
D) equals 1.

Question 7

If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity, what is the percentage change in quantity?

Accepted Answer

A) -18.18% 
B) -29.89% 
C) -26% 
D) -35.14% 
A) -18.18% 
B) -29.89% 
C) -26% 
D) -35.14%

Question 8

In Ordinary Least Squares Regression, the gap between the value of the dependent variable and the predicted value is called

Accepted Answer

A) the error term. 
B) the minimizing coefficient. 
C) the residual. 
D) the explanatory variable. 
A) the error term. 
B) the minimizing coefficient. 
C) the residual. 
D) the explanatory variable.

Question 9

If there is a causal relationship between two variables X and Y,

Accepted Answer

A) both should be used as explanatory variables. 
B) then the causal variable should be used as the explanatory variable. 
C) then they must be positively correlated. 
D) one of them can be omitted from the analysis. 
A) both should be used as explanatory variables. 
B) then the causal variable should be used as the explanatory variable. 
C) then they must be positively correlated. 
D) one of them can be omitted from the analysis.

Question 10

To calculate the point elasticity of demand, a manager must know

Accepted Answer

A) where the supply curve intersects the demand curve. 
B) two points on the demand curve. 
C) information about the entire demand curve. 
D) whether or not the demand curve is linear. 
A) where the supply curve intersects the demand curve. 
B) two points on the demand curve. 
C) information about the entire demand curve. 
D) whether or not the demand curve is linear.

Question 11

An inferior good has a ________ income elasticity of demand and quantity demanded ________ as income rises.

Accepted Answer

A) negative; increases 
B) negative; decreases 
C) positive; increases 
D) positive; decreases 
A) negative; increases 
B) negative; decreases 
C) positive; increases 
D) positive; decreases

Question 12

Which of the following statements is TRUE?

Accepted Answer

A) If two variables X and Y are correlated, then X causes changes in Y. 
B) If two variables X and Y are correlated, then Y causes changes in X. 
C) If X causes changes in Y, then X and Y are correlated. 
D) None of the above. 
A) If two variables X and Y are correlated, then X causes changes in Y. 
B) If two variables X and Y are correlated, then Y causes changes in X. 
C) If X causes changes in Y, then X and Y are correlated. 
D) None of the above.

Question 13

The elasticity of demand is

Accepted Answer

A) measured in money (e.g., dollars). 
B) measured in units of the good (e.g., slices of pizza). 
C) a pure number (e.g. unitless). 
D) measured in money/unit (e.g., 1.50 $/slice of pizza). 
A) measured in money (e.g., dollars). 
B) measured in units of the good (e.g., slices of pizza). 
C) a pure number (e.g. unitless). 
D) measured in money/unit (e.g., 1.50 $/slice of pizza).

Question 14

The market demand for wheat is Q = 100 - 2p + 1pb + 2Y. If the price of wheat, p, is $2, and the price of barley, pb, is $3, and income, Y, is $1000, the income elasticity of wheat is

Accepted Answer

A) 2 ∗ (1000/2099). 
B) 2. 
C) 1/2 ∗ (1000/2099). 
D) Cannot be calculated from the information provided. 
A) 2 ∗ (1000/2099). 
B) 2. 
C) 1/2 ∗ (1000/2099). 
D) Cannot be calculated from the information provided.

Question 15

If demand is perfectly inelastic,

Accepted Answer

A) then a 1% increase in price leads to a fall in quantity of greater than 1%. 
B) then a 1% increase in price leads to a fall in quantity of less than 1%. 
C) then a 1% increase in prices then quantity demanded falls to zero. 
D) then a 1% increase in price has no effect on quantity demanded. 
A) then a 1% increase in price leads to a fall in quantity of greater than 1%. 
B) then a 1% increase in price leads to a fall in quantity of less than 1%. 
C) then a 1% increase in prices then quantity demanded falls to zero. 
D) then a 1% increase in price has no effect on quantity demanded.

Question 16

When a variable is determined by a factor inside of the function or model being evaluated, it is said to be

Accepted Answer

A) endogenous. 
B) exogenous. 
C) unexplained. 
D) statistically insignificant. 
A) endogenous. 
B) exogenous. 
C) unexplained. 
D) statistically insignificant.

Question 17

If demand is inelastic,

Accepted Answer

A) then a 1% increase in price leads to a fall in quantity of greater than 1%. 
B) then a 1% increase in price leads to a fall in quantity of less than 1%. 
C) then a 1% increase in price leads to a fall in quantity of 1%. 
D) then a 1% increase in price leads to a rise in quantity of less than 1%. 
A) then a 1% increase in price leads to a fall in quantity of greater than 1%. 
B) then a 1% increase in price leads to a fall in quantity of less than 1%. 
C) then a 1% increase in price leads to a fall in quantity of 1%. 
D) then a 1% increase in price leads to a rise in quantity of less than 1%.

Question 18

An estimation method is unbiased if it produces a(n)________ that equals the ________ on average.

Accepted Answer

A) R2; t-statistic 
B) estimated coefficient; true coefficient 
C) error term; standard error 
D) estimated coefficient; residual 
A) R2; t-statistic 
B) estimated coefficient; true coefficient 
C) error term; standard error 
D) estimated coefficient; residual

Question 19

The cross price elasticity of demand between two goods will be positive if

Accepted Answer

A) the two goods are complements. 
B) the two goods are substitutes. 
C) the two goods are luxuries. 
D) one of the goods is a luxury and the other is a necessity. 
A) the two goods are complements. 
B) the two goods are substitutes. 
C) the two goods are luxuries. 
D) one of the goods is a luxury and the other is a necessity.

Question 20

A horizontal demand curve for a good could arise because consumers

Accepted Answer

A) are irrational. 
B) are not sensitive to price changes. 
C) view this good as identical to another good. 
D) have no equivalent substitutes for this good. 
A) are irrational. 
B) are not sensitive to price changes. 
C) view this good as identical to another good. 
D) have no equivalent substitutes for this good.

A vertical demand curve

If the price elasticity of demand for a good is less than one in absolute value, economists characterize that demand is

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If it is difficult to substitute for a good in the short run, but easy in the long run, then

If the demand curve is given by Q = a + bp, then a is

The market demand for wheat is Q = 100 - 2p + 1pb, where pb is the price of barley. The cross price elasticity of demand for wheat with respect to barley

If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity, what is the percentage change in quantity?

In Ordinary Least Squares Regression, the gap between the value of the dependent variable and the predicted value is called

If there is a causal relationship between two variables X and Y,

To calculate the point elasticity of demand, a manager must know

An inferior good has a income elasticity of demand and quantity demanded as income rises.

Which of the following statements is TRUE?

The elasticity of demand is

The market demand for wheat is Q = 100 - 2p + 1pb + 2Y. If the price of wheat, p, is $2, and the price of barley, pb, is $3, and income, Y, is $1000, the income elasticity of wheat is

If demand is perfectly inelastic,

When a variable is determined by a factor inside of the function or model being evaluated, it is said to be

If demand is inelastic,

An estimation method is unbiased if it produces a(n) that equals the on average.

The cross price elasticity of demand between two goods will be positive if

A horizontal demand curve for a good could arise because consumers

Introduction

Supply and Demand

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 3: Empirical Methods for Demand Analysis

A vertical demand curve

If the price elasticity of demand for a good is less than one in absolute value, economists characterize that demand is

If the price of orange juice rises 10%, and as a result the quantity demanded falls by 8%, the price elasticity of demand for orange juice is

If it is difficult to substitute for a good in the short run, but easy in the long run, then

If the demand curve is given by Q = a + bp, then a is

The market demand for wheat is Q = 100 - 2p + 1pb, where pb is the price of barley. The cross price elasticity of demand for wheat with respect to barley

If the price of a slice of pizza rises from $2.50 to $3, and quantity demanded falls from 10,000 slices to 7,400 slices, using the formula for arc price elasticity, what is the percentage change in quantity?

In Ordinary Least Squares Regression, the gap between the value of the dependent variable and the predicted value is called

If there is a causal relationship between two variables X and Y,

To calculate the point elasticity of demand, a manager must know

An inferior good has a ________ income elasticity of demand and quantity demanded ________ as income rises.

Which of the following statements is TRUE?

The elasticity of demand is

The market demand for wheat is Q = 100 - 2p + 1pb + 2Y. If the price of wheat, p, is $2, and the price of barley, pb, is $3, and income, Y, is $1000, the income elasticity of wheat is

If demand is perfectly inelastic,

When a variable is determined by a factor inside of the function or model being evaluated, it is said to be

If demand is inelastic,

An estimation method is unbiased if it produces a(n)________ that equals the ________ on average.

The cross price elasticity of demand between two goods will be positive if

A horizontal demand curve for a good could arise because consumers

Introduction

Supply and Demand

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

An inferior good has a income elasticity of demand and quantity demanded as income rises.

An estimation method is unbiased if it produces a(n) that equals the on average.