Question 1

Suppose demand is given by Qxd = 50 - 4Px + 6Py + Ax, where Px = $4, Py = $2, and Ax = $50. What is the quantity demanded of good x?

Accepted Answer

A)  96 
B)  50 
C)  46 
D)  72 
A)  96 
B)  50 
C)  46 
D)  72

Question 2

The demand for good X has been estimated to be ln Qxd = 100 - 2.5 ln PX + 4 ln PY + ln M. The income elasticity of good X is:

Accepted Answer

A)  4.0. 
B)  1.0. 
C)  2.0. 
D)  -2.5. 
A)  4.0. 
B)  1.0. 
C)  2.0. 
D)  -2.5.

Question 3

Several years ago the National Association of Broadcasters imposed restrictions on the amount of nonprogram material (commercials) that could be aired during children's television shows, effectively reducing the quantity of advertising allowed during children's viewing hours by 33 percent. Within four months, the price of a minute of advertising on network television increased by roughly 14 percent. What impact do you think this had on the revenues of the networks?

Accepted Answer

The own price elasticity of demand for a

Question 4

Suppose the equilibrium price in the market is $10 and the price elasticity of demand for the linear demand function at the market equilibrium is -1.25. Then we know that:

Accepted Answer

A)  demand is inelastic. 
B)  marginal revenue is $2. 
C)  marginal revenue is $50. 
D)  demand is unit elastic. 
A)  demand is inelastic. 
B)  marginal revenue is $2. 
C)  marginal revenue is $50. 
D)  demand is unit elastic.

Question 5

Suppose the own price elasticity of demand for good X is -5, and the quantity of good X decreases by 5 percent. What would you expect to happen to the total expenditures on good X?

Accepted Answer

A)  Increase 
B)  Decrease 
C)  Unchanged 
D)  Neither increase, decrease, nor remain unchanged 
A)  Increase 
B)  Decrease 
C)  Unchanged 
D)  Neither increase, decrease, nor remain unchanged

Question 6

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 elastic

Question 7

If the cross-price elasticity between goods X and Y is positive, we know the goods are:

Accepted Answer

A)  inferior goods. 
B)  complements. 
C)  inelastic. 
D)  substitutes. 
A)  inferior goods. 
B)  complements. 
C)  inelastic. 
D)  substitutes.

Question 8

The manager can be 95 percent confident that the true value of the underlying parameters in a regression is not zero if the absolute value of the t-statistic is:

Accepted Answer

A)  less than 1. 
B)  less than 2. 
C)  greater than 1. 
D)  greater than 2. 
A)  less than 1. 
B)  less than 2. 
C)  greater than 1. 
D)  greater than 2.

Question 9

The demand function for DVD players has been estimated to be QPlayer = 134 - 1.07PDVD + 46Pm - 2.1PDVD - 5M, where QPlayer is the quantity of DVD players, PDVD is the price of a videocassette, Pm is the price of a movie, PPlayer is the price of a DVD player, and M is income. Based on this information, answer the following questions.
a. Are DVD players normal or inferior goods?
b. Are movies substitutes or complements for DVD players?
c. What additional information is needed to calculate the price elasticity of demand for DVD players?

Accepted Answer

a. Since the coefficient associated with

Question 10

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is -$200. Then we know that the own price elasticity of demand is:

Accepted Answer

A)  -0.5. 
B)  -1. 
C)  2. 
D) It cannot be determined from the information contained in the question. 
A)  -0.5. 
B)  -1. 
C)  2. 
D) It cannot be determined from the information contained in the question.

Question 11

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

Accepted Answer

A)  demand is perfectly inelastic. 
B)  the demand curve is horizontal. 
C)  consumers do not respond at all to changes in price. 
D)  demand is neither perfectly inelastic nor is the demand curve horizontal. 
A)  demand is perfectly inelastic. 
B)  the demand curve is horizontal. 
C)  consumers do not respond at all to changes in price. 
D)  demand is neither perfectly inelastic nor is the demand curve horizontal.

Question 12

The demand for good X has been estimated to be ln Qxd = 100 - 2.5 ln PX + 4 ln PY + ln M. The own price elasticity of good X is:

Accepted Answer

A)  -2.5. 
B)  4.0. 
C)  -2.5 percent. 
D)  4.0 percent. 
A)  -2.5. 
B)  4.0. 
C)  -2.5 percent. 
D)  4.0 percent.

Question 13

The price elasticity of demand is -2.0 for a certain firm's product. If the firm raises price, the firm manager can expect total revenue to:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  either increase or remain constant, depending upon the size of the price increase. 
A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  either increase or remain constant, depending upon the size of the price increase.

Question 14

You work for an unemployment agency that distributes unemployment checks to unemployed workers in your state. Your boss recently learned that the president proposed a 21 percent increase in the minimum wage, and she wants you to provide her with an estimate of the number of additional workers who will file for unemployment compensation claims next year if the bill passes. Based on library research at a nearby university, you learn that about 200,000 workers in your state earn at or below the current minimum wage. Further library research turns up a study that reports the own price elasticity of demand for minimum wage earners to be -0.30. Based on your findings, how many additional workers do you think will file unemployment claims in your state?

Accepted Answer

Since the elasticity of demand for minim

Question 15

The following estimates have been obtained for the market demand for cereal: ln Q = 9.01 - 0.68 ln P + 0.75 ln A - 1.3 ln M, where Q is the quantity of cereal, P is the price of cereal, A is the level of advertising, and M is income. Based on this information, determine the effect on the consumption of cereal of
a. A 5 percent reduction in the price of cereal.
b. A 4 percent increase in income.
c. A 20 percent reduction in cereal advertising.

Accepted Answer

a. Since the own price elasticity is -0.

Question 16

Suppose a regression with 51 observations returns a regression sum of squares of 56,000 and a total sum of squares of 250,000. The associated residual sum of squares is:

Accepted Answer

A)  194,000. 
B)  200,000. 
C)  150,000. 
D)  None of the choices. 
A)  194,000. 
B)  200,000. 
C)  150,000. 
D)  None of the choices.

Question 17

If quantity demanded for sneakers falls by 6 percent when price increases 20 percent, we know that the absolute value of the own price elasticity of sneakers is:

Accepted Answer

A)  0.3. 
B)  0.7. 
C)  2.3. 
D)  3.3. 
A)  0.3. 
B)  0.7. 
C)  2.3. 
D)  3.3.

Question 18

When marginal revenue is negative, demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  There is not sufficient information to classify the elasticity of demand. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  There is not sufficient information to classify the elasticity of demand.

Question 19

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. Based on this information, we know that the demand for good X is:

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

The demand curve for a good is horizontal when it is:

Accepted Answer

A)  a perfectly inelastic good. 
B)  a unitary elastic good. 
C)  a perfectly elastic good. 
D)  an inferior good. 
A)  a perfectly inelastic good. 
B)  a unitary elastic good. 
C)  a perfectly elastic good. 
D)  an inferior good.

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the quantity demanded of good x?

The demand for good X has been estimated to be ln Q_x^d = 100 - 2.5 ln P_X + 4 ln P_Y + ln M. The income elasticity of good X is:

Suppose the equilibrium price in the market is $10 and the price elasticity of demand for the linear demand function at the market equilibrium is -1.25. Then we know that:

Suppose the own price elasticity of demand for good X is -5, and the quantity of good X decreases by 5 percent. What would you expect to happen to the total expenditures on good X?

If the cross-price elasticity between goods X and Y is positive, we know the goods are:

The manager can be 95 percent confident that the true value of the underlying parameters in a regression is not zero if the absolute value of the t-statistic is:

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is -$200. Then we know that the own price elasticity of demand is:

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

The demand for good X has been estimated to be ln Q_x^d = 100 - 2.5 ln P_X + 4 ln P_Y + ln M. The own price elasticity of good X is:

The price elasticity of demand is -2.0 for a certain firm's product. If the firm raises price, the firm manager can expect total revenue to:

Suppose a regression with 51 observations returns a regression sum of squares of 56,000 and a total sum of squares of 250,000. The associated residual sum of squares is:

If quantity demanded for sneakers falls by 6 percent when price increases 20 percent, we know that the absolute value of the own price elasticity of sneakers is:

When marginal revenue is negative, demand is:

The demand curve for a good is horizontal when it is:

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

Exam 3: Quantitative Demand Analysis

Suppose demand is given by Qxd = 50 - 4Px + 6Py + Ax, where Px = $4, Py = $2, and Ax = $50. What is the quantity demanded of good x?

The demand for good X has been estimated to be ln Qxd = 100 - 2.5 ln PX + 4 ln PY + ln M. The income elasticity of good X is:

Suppose the equilibrium price in the market is $10 and the price elasticity of demand for the linear demand function at the market equilibrium is -1.25. Then we know that:

Suppose the own price elasticity of demand for good X is -5, and the quantity of good X decreases by 5 percent. What would you expect to happen to the total expenditures on good X?

If the cross-price elasticity between goods X and Y is positive, we know the goods are:

The manager can be 95 percent confident that the true value of the underlying parameters in a regression is not zero if the absolute value of the t-statistic is:

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse) demand function is -$200. Then we know that the own price elasticity of demand is:

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

The demand for good X has been estimated to be ln Qxd = 100 - 2.5 ln PX + 4 ln PY + ln M. The own price elasticity of good X is:

The price elasticity of demand is -2.0 for a certain firm's product. If the firm raises price, the firm manager can expect total revenue to:

Suppose a regression with 51 observations returns a regression sum of squares of 56,000 and a total sum of squares of 250,000. The associated residual sum of squares is:

If quantity demanded for sneakers falls by 6 percent when price increases 20 percent, we know that the absolute value of the own price elasticity of sneakers is:

When marginal revenue is negative, demand is:

The demand curve for a good is horizontal when it is:

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

Suppose demand is given by Q_x^d = 50 - 4P_x + 6P_y + A_x, where P_x = $4, P_y = $2, and A_x = $50. What is the quantity demanded of good x?

The demand for good X has been estimated to be ln Q_x^d = 100 - 2.5 ln P_X + 4 ln P_Y + ln M. The income elasticity of good X is:

The demand for good X has been estimated to be ln Q_x^d = 100 - 2.5 ln P_X + 4 ln P_Y + ln M. The own price elasticity of good X is: