Question 1

If the demand function for a particular good is Q = 20 − 8P,then demand at a price of $1 is:

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  The elasticity cannot be determined. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  The elasticity cannot be determined.

Question 2

A firm is considering raising its price by 9 percent and has hired an econometrician to estimate the elasticity of demand for its product.The econometrician estimates the parameters of a log-liner demand function and reports that the parameter estimate for the elasticity of demand is −1.5 and the standard error of the estimate is 0.3.
a.If the firm raises its price by 9 percent,what is the expected change in quantity demanded?
b.Approximate the upper and lower bounds on the 95 percent confidence interval for the change in quantity demanded.

Accepted Answer

a.Using the estimated own price elastici

Question 3

The demand for good X has been estimated by Q xd = 12 − 3Px + 4Py.Suppose that good X sells at $2 per unit and good Y sells for $1 per unit.Calculate the own price elasticity.

Accepted Answer

A)  −0.2 
B)  −0.3 
C)  −0.5 
D)  −0.6 
A)  −0.2 
B)  −0.3 
C)  −0.5 
D)  −0.6

Question 4

As we move down along a linear demand curve,the price elasticity of demand becomes more:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  log-linear. 
D)  variable. 
A)  elastic. 
B)  inelastic. 
C)  log-linear. 
D)  variable.

Question 5

Non-fed ground beef is an inferior good.In economic booms,grocery managers should:

Accepted Answer

A)  increase their orders of non-fed ground beef. 
B)  reduce their orders of non-fed ground beef. 
C)  not change their orders of non-fed ground beef. 
D)  neither increase, reduce, nor maintain their current orders for non-fed ground beef. 
A)  increase their orders of non-fed ground beef. 
B)  reduce their orders of non-fed ground beef. 
C)  not change their orders of non-fed ground beef. 
D)  neither increase, reduce, nor maintain their current orders for non-fed ground beef.

Question 6

Lemonade,a good with many close substitutes,should have an own price elasticity that is:

Accepted Answer

A)  unitary. 
B)  relatively elastic. 
C)  relatively inelastic. 
D)  perfectly inelastic. 
A)  unitary. 
B)  relatively elastic. 
C)  relatively inelastic. 
D)  perfectly inelastic.

Question 7

A consumer spends all of her income on only one good.What is the income elasticity of demand for this good?
 What is the own price elasticity of demand for this good?

Accepted Answer

Since PQ = M,we can solve for

Question 8

Suppose the income elasticity for transportation is 1.8.Which of the following is an INCORRECT statement?

Accepted Answer

A)  Transportation is a normal good. 
B)  Expenditures on transportation grow more rapidly than income grows. 
C)  Expenditures on transportation will fall less rapidly than income falls. 
D)  Whenever the income increases by 1 percent, the expenditure on transportation increases by 1.8 percent. 
A)  Transportation is a normal good. 
B)  Expenditures on transportation grow more rapidly than income grows. 
C)  Expenditures on transportation will fall less rapidly than income falls. 
D)  Whenever the income increases by 1 percent, the expenditure on transportation increases by 1.8 percent.

Question 9

The demand for good X is estimated to be Qxd = 10,000 − 4PX + 5PY + 2M + AX where PX is the price of X,PY is the price of good Y,M is income,and AX is the amount of advertising on X.Suppose the present price of good X is $50,PY = $100,M = $25,000,and AX = 1,000 units.What is the demand curve for good X?

Accepted Answer

A)  61,500 
B)  61,300 
C)  61,300 − 4PX 
D)  61,500 − 4PX 
A)  61,500 
B)  61,300 
C)  61,300 − 4PX 
D)  61,500 − 4PX

Question 10

The demand for good X has been estimated by Qxd = 6 − 2Px + 5Py.Suppose that good X sells at $3 per unit and good Y sells for $2 per unit.Calculate the own price elasticity.

Accepted Answer

A)  −0.3 
B)  −0.4 
C)  −0.5 
D)  −0.6 
A)  −0.3 
B)  −0.4 
C)  −0.5 
D)  −0.6

Question 11

You are the manager of a popular shoe company.You know that the advertising elasticity of demand for your product is 0.15.How much will you have to increase advertising in order to increase demand by 10 percent?

Accepted Answer

A)  0.02 percent 
B)  38.6 percent 
C)  66.7 percent 
D)  4.3 percent 
A)  0.02 percent 
B)  38.6 percent 
C)  66.7 percent 
D)  4.3 percent

Question 12

The elasticity of demand for gasoline has been estimated to be 2.0,and the standard error is 1.0.The upper and lower bounds on the 95 percent confidence interval for the elasticity of demand for gasoline are:

Accepted Answer

A)  3 and 2. 
B)  2 and 1. 
C)  3 and 1. 
D)  None of the preceding statements is correct. 
A)  3 and 2. 
B)  2 and 1. 
C)  3 and 1. 
D)  None of the preceding statements is correct.

Question 13

Which of the following provides a measure of the overall fit of a regression?

Accepted Answer

A)  t-statistic 
B)  F-statistic 
C)  R-square 
D)  The F-statistic and R-square 
A)  t-statistic 
B)  F-statistic 
C)  R-square 
D)  The F-statistic and R-square

Question 14

When the price of sugar was "low," U.S.consumers spent a total of $3 billion annually on sugar consumption.When the price doubled,consumer expenditures increased to $5 billion annually.This data indicates that:

Accepted Answer

A)  the demand for sugar is inelastic. 
B)  the demand curve for sugar is upward sloping. 
C)  the quantity demanded of sugar increased. 
D)  the demand curve for sugar is upward sloping and the quantity demanded of sugar increased. 
A)  the demand for sugar is inelastic. 
B)  the demand curve for sugar is upward sloping. 
C)  the quantity demanded of sugar increased. 
D)  the demand curve for sugar is upward sloping and the quantity demanded of sugar increased.

Question 15

If the own price elasticity of demand is infinite in absolute value,then:

Accepted Answer

A)  demand is perfectly elastic. 
B)  the demand curve is vertical. 
C)  consumers do not respond at all to changes in price. 
D)  the demand curve is vertical and consumers do not respond at all to changes in price. 
A)  demand is perfectly elastic. 
B)  the demand curve is vertical. 
C)  consumers do not respond at all to changes in price. 
D)  the demand curve is vertical and consumers do not respond at all to changes in price.

Question 16

The lower the standard error:

Accepted Answer

A)  the less confident the manager can be that the parameter estimates reflect the true values. 
B)  the more confident the manager can be that the parameter estimates reflect the true values. 
C)  the more precisely the parameter estimates the true values. 
D)  the less precisely the parameter estimates the true values. 
A)  the less confident the manager can be that the parameter estimates reflect the true values. 
B)  the more confident the manager can be that the parameter estimates reflect the true values. 
C)  the more precisely the parameter estimates the true values. 
D)  the less precisely the parameter estimates the true values.

Question 17

Which of the following is a correct statement about the own price elasticity of demand?

Accepted Answer

A)  Demand tends to be more inelastic in the short term than in the long term. 
B)  Demand tends to be more elastic as more substitutes are available. 
C)  Demand tends to be more inelastic for goods that comprise a smaller share of a consumer's budget. 
D)  All of the statements are correct. 
A)  Demand tends to be more inelastic in the short term than in the long term. 
B)  Demand tends to be more elastic as more substitutes are available. 
C)  Demand tends to be more inelastic for goods that comprise a smaller share of a consumer's budget. 
D)  All of the statements are correct.

Question 18

Suppose the demand function is given by Qxd = 10Px0.9 Py0.5 M0.22 H.Then the cross-price elasticity between goods x and y is:

Accepted Answer

A)  0.9. 
B)  0.5. 
C)  0.22. 
D)  −0.5. 
A)  0.9. 
B)  0.5. 
C)  0.22. 
D)  −0.5.

Question 19

If the absolute value of the own price elasticity of demand is greater than 1,then demand is said to be:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  neither elastic, inelastic, nor unitary elastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  neither elastic, inelastic, nor unitary elastic.

Question 20

Suppose Q xd = 10,000 − 2 Px + 3 Py − 4.5M,where Px = $100,Py = $50,and M = $2,000.How much of good X is consumed?

Accepted Answer

A)  100 units 
B)  500 units 
C)  1,100 units 
D)  950 units 
A)  100 units 
B)  500 units 
C)  1,100 units 
D)  950 units

If the demand function for a particular good is Q = 20 − 8P,then demand at a price of $1 is:

The demand for good X has been estimated by Q _x^d = 12 − 3P_x + 4P_y.Suppose that good X sells at $2 per unit and good Y sells for $1 per unit.Calculate the own price elasticity.

As we move down along a linear demand curve,the price elasticity of demand becomes more:

Non-fed ground beef is an inferior good.In economic booms,grocery managers should:

Lemonade,a good with many close substitutes,should have an own price elasticity that is:

A consumer spends all of her income on only one good.What is the income elasticity of demand for this good? What is the own price elasticity of demand for this good?

Suppose the income elasticity for transportation is 1.8.Which of the following is an INCORRECT statement?

The demand for good X has been estimated by Q_x^d = 6 − 2P_x + 5P_y.Suppose that good X sells at $3 per unit and good Y sells for $2 per unit.Calculate the own price elasticity.

You are the manager of a popular shoe company.You know that the advertising elasticity of demand for your product is 0.15.How much will you have to increase advertising in order to increase demand by 10 percent?

The elasticity of demand for gasoline has been estimated to be 2.0,and the standard error is 1.0.The upper and lower bounds on the 95 percent confidence interval for the elasticity of demand for gasoline are:

Which of the following provides a measure of the overall fit of a regression?

When the price of sugar was "low," U.S.consumers spent a total of $3 billion annually on sugar consumption.When the price doubled,consumer expenditures increased to $5 billion annually.This data indicates that:

If the own price elasticity of demand is infinite in absolute value,then:

The lower the standard error:

Which of the following is a correct statement about the own price elasticity of demand?

Suppose the demand function is given by Q_x^d = 10P_x^0.9 P_y^0.5 M^0.22 H.Then the cross-price elasticity between goods x and y is:

If the absolute value of the own price elasticity of demand is greater than 1,then demand is said to be:

Suppose Q _x^d = 10,000 − 2 P_x + 3 P_y − 4.5M,where P_x = $100,P_y = $50,and M = $2,000.How much of good X is consumed?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

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Exam 3: Quantitative Demand Analysis

If the demand function for a particular good is Q = 20 − 8P,then demand at a price of $1 is:

The demand for good X has been estimated by Q xd = 12 − 3Px + 4Py.Suppose that good X sells at $2 per unit and good Y sells for $1 per unit.Calculate the own price elasticity.

As we move down along a linear demand curve,the price elasticity of demand becomes more:

Non-fed ground beef is an inferior good.In economic booms,grocery managers should:

Lemonade,a good with many close substitutes,should have an own price elasticity that is:

A consumer spends all of her income on only one good.What is the income elasticity of demand for this good? What is the own price elasticity of demand for this good?

Suppose the income elasticity for transportation is 1.8.Which of the following is an INCORRECT statement?

The demand for good X has been estimated by Qxd = 6 − 2Px + 5Py.Suppose that good X sells at $3 per unit and good Y sells for $2 per unit.Calculate the own price elasticity.

You are the manager of a popular shoe company.You know that the advertising elasticity of demand for your product is 0.15.How much will you have to increase advertising in order to increase demand by 10 percent?

The elasticity of demand for gasoline has been estimated to be 2.0,and the standard error is 1.0.The upper and lower bounds on the 95 percent confidence interval for the elasticity of demand for gasoline are:

Which of the following provides a measure of the overall fit of a regression?

When the price of sugar was "low," U.S.consumers spent a total of $3 billion annually on sugar consumption.When the price doubled,consumer expenditures increased to $5 billion annually.This data indicates that:

If the own price elasticity of demand is infinite in absolute value,then:

The lower the standard error:

Which of the following is a correct statement about the own price elasticity of demand?

Suppose the demand function is given by Qxd = 10Px0.9 Py0.5 M0.22 H.Then the cross-price elasticity between goods x and y is:

If the absolute value of the own price elasticity of demand is greater than 1,then demand is said to be:

Suppose Q xd = 10,000 − 2 Px + 3 Py − 4.5M,where Px = $100,Py = $50,and M = $2,000.How much of good X is consumed?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

The demand for good X has been estimated by Q _x^d = 12 − 3P_x + 4P_y.Suppose that good X sells at $2 per unit and good Y sells for $1 per unit.Calculate the own price elasticity.

The demand for good X has been estimated by Q_x^d = 6 − 2P_x + 5P_y.Suppose that good X sells at $3 per unit and good Y sells for $2 per unit.Calculate the own price elasticity.

Suppose the demand function is given by Q_x^d = 10P_x^0.9 P_y^0.5 M^0.22 H.Then the cross-price elasticity between goods x and y is:

Suppose Q _x^d = 10,000 − 2 P_x + 3 P_y − 4.5M,where P_x = $100,P_y = $50,and M = $2,000.How much of good X is consumed?