Question 1

Caution must be exercised in using regression models for prediction when:

Accepted Answer

A)  the value of the independent variable lies inside the range of observations from which the model was estimated 
B)  the value of the independent variable lies outside the range of observations from which the model was estimated 
C)  diminishing returns are present 
D)  the existence of saturation levels are present 
E)  none of the above 
A)  the value of the independent variable lies inside the range of observations from which the model was estimated 
B)  the value of the independent variable lies outside the range of observations from which the model was estimated 
C)  diminishing returns are present 
D)  the existence of saturation levels are present 
E)  none of the above B

Question 2

When there is multicollinearity in an estimated regression equation,

Accepted Answer

A)  the coefficients are likely to be small. 
B)  the t-statistics are likely to be small even though the R2 is large. 
C)  the coefficient of determination is likely to be small. 
D)  the problem of omitted variables is likely. 
E)  the error terms will tend to have a cyclical pattern. 
A)  the coefficients are likely to be small. 
B)  the t-statistics are likely to be small even though the R2 is large. 
C)  the coefficient of determination is likely to be small. 
D)  the problem of omitted variables is likely. 
E)  the error terms will tend to have a cyclical pattern. B

Question 3

In regression analysis,the existence of a significant pattern in successive values of the error term constitutes:

Accepted Answer

A)  heteroscedasticity 
B)  autocorrelation 
C)  multicollinearity 
D)  nonlinearities 
E)  a simultaneous equation relationship 
A)  heteroscedasticity 
B)  autocorrelation 
C)  multicollinearity 
D)  nonlinearities 
E)  a simultaneous equation relationship B

Question 4

Consider the following linear demand function where QD = quantity demanded,P = selling price,and Y = disposable income: QD = −36 −2.1P + .24Y
The coefficient of P indicates that (all other things being held constant):

Accepted Answer

A)  for a one percent increase in price,quantity demanded would decline by 2.1 percent 
B)  for a one unit increase in price,quantity demanded would decline by 2.1 units 
C)  for a one percent increase in price,quantity demanded would decline by 2.1 units 
D)  for a one unit increase in price,quantity demanded would decline by 2.1 percent 
E)  none of the above 
A)  for a one percent increase in price,quantity demanded would decline by 2.1 percent 
B)  for a one unit increase in price,quantity demanded would decline by 2.1 units 
C)  for a one percent increase in price,quantity demanded would decline by 2.1 units 
D)  for a one unit increase in price,quantity demanded would decline by 2.1 percent 
E)  none of the above

Question 5

Which is NOT true about the coefficient of determination?

Accepted Answer

A)  As you add more variables,the R-square generally rises. 
B)  As you add more variables,the adjusted R-square can fall. 
C)  If the R-square is above 50%,the regression is considered significant. 
D)  The R-square gives the percent of the variation in the dependent variable that is explained by the independent variables. 
E)  The higher is the R-square,the better is the fit. 
A)  As you add more variables,the R-square generally rises. 
B)  As you add more variables,the adjusted R-square can fall. 
C)  If the R-square is above 50%,the regression is considered significant. 
D)  The R-square gives the percent of the variation in the dependent variable that is explained by the independent variables. 
E)  The higher is the R-square,the better is the fit.

Question 6

The following demand function has been estimated for Fantasy pinball machines:
QD = 3,500 ? 40P + 17.5Px + 670U + .0090A + 6,500N where $\quad P =$ monthly rental price of Fantasy pinball machines
$\mathrm { P } _ { \mathrm { X } } =$ monthly rental price of Old Chicago pinball machines (their largest competitor)
$\mathrm { U } =$ current unemployment rate in the 10 largest metropolitan areas
$\mathrm { A } =$ advertising expenditures for Fantasy pinball machines
$\mathrm { N } =$ fraction of the U.S. popul ation between ages 10 and 30 (a) What is the point price elasticity of demand for $F$ antasy pinball machines when $P = \$ 150$, $\mathrm { P } _ { \mathrm { X } } = \$ 100 , \mathrm { U } = .12 , \mathrm {~A} = \$ 200,000$ and $\mathrm { N } = .35 ?$
(b) What is the point cross elasticity of demand with respect to Old Chicago pinball machines for the values of the independent variables given in part (a)?

Accepted Answer

None

Question 7

Given the following demand function:
Q = 2.0 P?1.33 Y2.0 A.50 
$$\begin{array} { l l } 
\text { where } & Q = \text { quantity demanded (thousands of units) } \
& P = \text { price ( } \$ / u n i t ) \
& Y = \text { disposable income per capita (\$ thousands) } \
& A = \text { advertising expenditures ( } \$ \text { thousands) }
\end{array}$$ determine the following when P = $2/unit,Y = $8 (a) Frice el asticity of demand
(b) The approximate percentage increase in demand if disposable income percentage increases by $3 \%$.
(c) The approximate percentage increase in demand if advertising expenditures are increased by 5 percent.

Accepted Answer

(a) @#LAT-DLM& (independent of other variables)
(b

Question 8

A study of expenditures on food in cities resulting in the following equation: Log E = 0.693 Log Y + 0.224 Log N
Where E is Food Expenditures; Y is total expenditures on goods and services; and N is the size of the family.This evidence implies:

Accepted Answer

A)  that as total expenditures on goods and services rises,food expenditures falls. 
B)  that a one-percent increase in family size increases food expenditures .693%. 
C)  that a one-percent increase in family size increases food expenditures .224%. 
D)  that a one-percent increase in total expenditures increases food expenditures 1%. 
E)  that as family size increases,food expenditures go down. 
A)  that as total expenditures on goods and services rises,food expenditures falls. 
B)  that a one-percent increase in family size increases food expenditures .693%. 
C)  that a one-percent increase in family size increases food expenditures .224%. 
D)  that a one-percent increase in total expenditures increases food expenditures 1%. 
E)  that as family size increases,food expenditures go down.

Question 9

In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?

Accepted Answer

A)  the identification problem 
B)  autocorrelation 
C)  multicollinearity 
D)  heteroscedasticity 
E)  agency problems 
A)  the identification problem 
B)  autocorrelation 
C)  multicollinearity 
D)  heteroscedasticity 
E)  agency problems

Question 10

The presence of association between two variables does not necessarily imply causation for the following reason(s):

Accepted Answer

A)  the association between two variables may result simply from pure chance 
B)  the association between two variables may be the result of the influence of a third common factor 
C)  both variables may be the cause and the effect at the same time 
D)  a and b 
E)  a,b,and c 
A)  the association between two variables may result simply from pure chance 
B)  the association between two variables may be the result of the influence of a third common factor 
C)  both variables may be the cause and the effect at the same time 
D)  a and b 
E)  a,b,and c

Question 11

Demand functions in the multiplicative form are most common for all of the following reasons except:

Accepted Answer

A)  elasticities are constant over a range of data 
B)  ease of estimation of elasticities 
C)  exponents of parameters are the elasticities of those variables 
D)  marginal impact of a unit change in an individual variable is constant 
E)  c and d 
A)  elasticities are constant over a range of data 
B)  ease of estimation of elasticities 
C)  exponents of parameters are the elasticities of those variables 
D)  marginal impact of a unit change in an individual variable is constant 
E)  c and d

Question 12

​In a regression equation,one may measure the accuracy of the estimation by:

Accepted Answer

A)  ​calculating the standard deviation of the errors of prediction 
B)  ​calculating the standard error of the estimate 
C)  ​estimating the standard deviation of the errors of prediction 
D)  ​all of the above 
E)  a and b only 
A)  ​calculating the standard deviation of the errors of prediction 
B)  ​calculating the standard error of the estimate 
C)  ​estimating the standard deviation of the errors of prediction 
D)  ​all of the above 
E)  a and b only

Question 13

Using a sample of 100 consumers,a double-log regression model was used to estimate demand for gasoline.Standard errors of the coefficients appear in the parentheses below the coefficients.
$\operatorname { Ln } \mathrm { Q } = 2.45 - 0.67 \operatorname { Ln } \mathrm { P } + .45 \operatorname { Ln } \mathrm { Y } - .34 \operatorname { Ln } \mathrm { P } _ { \text {cars } }$
$\begin{array} { l l l }( .20 ) & ( .10 ) & ( .25 ) \end{array}$

Accepted Answer

A)  Gasoline is inelastic. 
B)  Gasoline is a normal good. 
C)  Cars and gasoline appear to be mild complements. 
D)  The coefficient on the price of cars (Pcars)is insignificant. 
E)  All of the coefficients are insignificant. 
A)  Gasoline is inelastic. 
B)  Gasoline is a normal good. 
C)  Cars and gasoline appear to be mild complements. 
D)  The coefficient on the price of cars (Pcars)is insignificant. 
E)  All of the coefficients are insignificant.

Question 14

The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:

Accepted Answer

A)  1.0 
B)  their minimum values 
C)  their average values 
D)  0.0 
E)  none of the above 
A)  1.0 
B)  their minimum values 
C)  their average values 
D)  0.0 
E)  none of the above

Question 15

The correlation coefficient ranges in value between 0.0 and 1.0.

Accepted Answer

A) True 
 B)False

Question 16

​In addition to prediction,one purpose of regression analysis is:

Accepted Answer

A)  to measure the overall "fit" of the model to the sample observations 
B)  ​to test whether the slope parameter β is equal to some particular value 
C)  ​to test whether the slope parameter β is equal to zero 
D)  ​b and c 
E)  ​none of the above 
A)  to measure the overall "fit" of the model to the sample observations 
B)  ​to test whether the slope parameter β is equal to some particular value 
C)  ​to test whether the slope parameter β is equal to zero 
D)  ​b and c 
E)  ​none of the above

Question 17

The coefficient of determination measures the proportion of the variation in the independent variable that is "explained" by the regression line.

Accepted Answer

A) True 
 B)False

Question 18

Consider the following multiplicative demand function where QD = quantity demanded,P = selling price,and Y = disposable income: $$Q _ { D } = 1.6 \mathrm { P } ^ { - 15 } \mathrm { Y } ^ { 2 }$$ The coefficient of Y indicates that (all other things being held constant):

Accepted Answer

A)  for a one percent increase in disposable income,quantity demanded would increase by .2 percent 
B)  for a one unit increase in disposable income,quantity demanded would increase by .2 units 
C)  for a one percent increase in disposable income quantity demanded would increase by .2 units 
D)  for a one unit increase in disposable income,quantity demanded would increase by .2 percent 
E)  none of the above 
A)  for a one percent increase in disposable income,quantity demanded would increase by .2 percent 
B)  for a one unit increase in disposable income,quantity demanded would increase by .2 units 
C)  for a one percent increase in disposable income quantity demanded would increase by .2 units 
D)  for a one unit increase in disposable income,quantity demanded would increase by .2 percent 
E)  none of the above

Question 19

The Identification Problem in the development of a demand function is a result of:

Accepted Answer

A)  the variance of the demand elasticity 
B)  the consistency of quantity demanded at any given point 
C)  the negative slope of the demand function 
D)  the simultaneous relationship between the demand and supply functions 
E)  none of the above 
A)  the variance of the demand elasticity 
B)  the consistency of quantity demanded at any given point 
C)  the negative slope of the demand function 
D)  the simultaneous relationship between the demand and supply functions 
E)  none of the above

Question 20

In testing whether each individual independent variables (Xs)in a multiple regression equation is statistically significant in explaining the dependent variable (Y),one uses the:

Accepted Answer

A)  F-test 
B)  Durbin-Watson test 
C)  t-test 
D)  z-test 
E)  none of the above 
A)  F-test 
B)  Durbin-Watson test 
C)  t-test 
D)  z-test 
E)  none of the above

Caution must be exercised in using regression models for prediction when:

When there is multicollinearity in an estimated regression equation,

In regression analysis,the existence of a significant pattern in successive values of the error term constitutes:

Consider the following linear demand function where Q_D = quantity demanded,P = selling price,and Y = disposable income: Q_D = −36 −2.1P + .24Y The coefficient of P indicates that (all other things being held constant):

Which is NOT true about the coefficient of determination?

A study of expenditures on food in cities resulting in the following equation: Log E = 0.693 Log Y + 0.224 Log N Where E is Food Expenditures; Y is total expenditures on goods and services; and N is the size of the family.This evidence implies:

In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?

The presence of association between two variables does not necessarily imply causation for the following reason(s):

Demand functions in the multiplicative form are most common for all of the following reasons except:

In a regression equation,one may measure the accuracy of the estimation by:

The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:

The correlation coefficient ranges in value between 0.0 and 1.0.

In addition to prediction,one purpose of regression analysis is:

The coefficient of determination measures the proportion of the variation in the independent variable that is "explained" by the regression line.

Consider the following multiplicative demand function where Q_D = quantity demanded,P = selling price,and Y = disposable income: $Q _ { D } = 1.6 \mathrm { P } ^ { - 15 } \mathrm { Y } ^ { 2 }$ The coefficient of Y indicates that (all other things being held constant):

The Identification Problem in the development of a demand function is a result of:

In testing whether each individual independent variables (Xs)in a multiple regression equation is statistically significant in explaining the dependent variable (Y),one uses the:

Introduction and Goals of the Firm

Fundamental Economic Concepts

Demand Analysis

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Cost Analysis

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

Exam 4: Estimating Demand

Caution must be exercised in using regression models for prediction when:

When there is multicollinearity in an estimated regression equation,

In regression analysis,the existence of a significant pattern in successive values of the error term constitutes:

Consider the following linear demand function where QD = quantity demanded,P = selling price,and Y = disposable income: QD = −36 −2.1P + .24Y The coefficient of P indicates that (all other things being held constant):

Which is NOT true about the coefficient of determination?

A study of expenditures on food in cities resulting in the following equation: Log E = 0.693 Log Y + 0.224 Log N Where E is Food Expenditures; Y is total expenditures on goods and services; and N is the size of the family.This evidence implies:

In which of the following econometric problems do we find Durbin-Watson statistic being far away from 2.0?

The presence of association between two variables does not necessarily imply causation for the following reason(s):

Demand functions in the multiplicative form are most common for all of the following reasons except:

​In a regression equation,one may measure the accuracy of the estimation by:

The constant or intercept term in a statistical demand study represents the quantity demanded when all independent variables are equal to:

The correlation coefficient ranges in value between 0.0 and 1.0.

​In addition to prediction,one purpose of regression analysis is:

The coefficient of determination measures the proportion of the variation in the independent variable that is "explained" by the regression line.

Consider the following multiplicative demand function where QD = quantity demanded,P = selling price,and Y = disposable income: QD=1.6P−15Y2Q _ { D } = 1.6 \mathrm { P } ^ { - 15 } \mathrm { Y } ^ { 2 }QD​=1.6P−15Y2 The coefficient of Y indicates that (all other things being held constant):

The Identification Problem in the development of a demand function is a result of:

In testing whether each individual independent variables (Xs)in a multiple regression equation is statistically significant in explaining the dependent variable (Y),one uses the:

Introduction and Goals of the Firm

Fundamental Economic Concepts

Demand Analysis

Business and Economic Forecasting

Managing in the Global Economy

Production Economics

Cost Analysis

Applications of Cost Theory

Prices,output,and Strategy: Pure and Monopolistic Competition

Price and Output Determination: Monopoly and Dominant Firms

Price and Output Determination: Oligopoly

Best-Practice Tactics: Game Theory

Pricing Techniques and Analysis

Contracting,governance,and Organizational Form

Government Regulation

Long-Term Investment Analysis

Filters

Consider the following linear demand function where Q_D = quantity demanded,P = selling price,and Y = disposable income: Q_D = −36 −2.1P + .24Y The coefficient of P indicates that (all other things being held constant):

In a regression equation,one may measure the accuracy of the estimation by:

In addition to prediction,one purpose of regression analysis is:

Consider the following multiplicative demand function where Q_D = quantity demanded,P = selling price,and Y = disposable income: $Q _ { D } = 1.6 \mathrm { P } ^ { - 15 } \mathrm { Y } ^ { 2 }$ The coefficient of Y indicates that (all other things being held constant):