Question 1

Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?

Accepted Answer

A) The total revenue from designer leather goods will not change. 
B) The percentage change in the quantity demanded of designer leather goods will be approximately equal to the percentage change in the quantity demanded of a box of 50 mailing envelopes. 
C) The percentage change in the quantity demanded for a box of 50 of mailing envelopes will be larger than the percentage change in the quantity demanded for designer leather goods. 
D) The percentage change in the quantity demanded for designer leather goods will be larger than the percentage change in the quantity demanded for a box of 50 of mailing envelopes.

Question 2

All of the following are true regarding the price elasticity of demand except which one?

Accepted Answer

A) It is measured in percentage changes. 
B) It measures how much the quantity demanded changes in response to a change in price. 
C) It measures the movement along the demand curve in response to a change in price. 
D) It measures how much the demand curve shifts in response to a change in price.

Question 3

Big Poppa's BBQ Sandwiches is a local restaurant specializing in BBQ sandwiches. Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Qd = 1,576.55 - (25.50 × P). The estimated regression equation suggests which of the following is true?

Accepted Answer

A) As the price of Big Poppa's BBQ sandwiches increases, the quantity demanded also increases. 
B) There is a negative relationship between the price of Big Poppa's BBQ sandwiches and the quantity demanded. 
C) The Law of Demand does not hold for Big Poppa's BBQ Sandwiches. 
D) If Big Poppa's increased its price by $1, the quantity demanded would increase by 25.50.

Question 4

The larger the standard error for a coefficient, the larger the confidence level.

Accepted Answer

A) True 
 B)False

Question 5

For any change in a business cycle, the percentage change in demand for a good with an income elasticity of 2.0 will be larger than the percentage change in demand for a good with an income elasticity of 1.0.

Accepted Answer

A) True 
 B)False

Question 6

You are the manager of a local flower shop and you compete with one other flower shop in your area. You estimate the cross- price elasticity of demand between your flowers and your competitor's flowers to be 2.60. If your competitor decreases the price of her flowers by 2 percent, you should expect which of the following?

Accepted Answer

A) a 5.2 percent decrease in the demand for your flowers 
B) a 5.2 percent increase in the demand for your flowers 
C) a 0.77 percent decrease in the demand for your flowers 
D) a 0.77 percent increase in the demand for your flowers

Question 7

Consider a 20 percent increase in the price of a 2 pound bag of sugar and a 20 percent increase in the price of first- class airline travel. In response to the price changes, which of the following is most likely to be true?

Accepted Answer

A) The total revenue from first- class airline travel will not change. 
B) The percentage change in the quantity demanded for a 2 pound bag of sugar will be larger than the percentage change in the quantity demanded for first- class airline travel. 
C) Because first- class airline travel is a luxury good, the quantity demanded will not change with the 20 percent increase in price. 
D) The percentage change in the quantity demanded for first- class airline travel will be larger than the percentage change in the quantity demanded for a 2 pound bag of sugar.

Question 8

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Qd = 650 - (15.25 × P). The estimated regression equation suggests that if Big City Java increased its price of grand mocha coffees from $6 to $8, the predicted quantity demanded of coffees would _________.

Accepted Answer

A) increase 
B) decrease 
C) not change 
D) exactly double

Question 9

If an 8 percent decrease in price leads to a 4 percent increase in the quantity demanded of the good, as a result of the price change, the total revenue for this product will________ .

Accepted Answer

A) not change 
B) increase 
C) double 
D) decrease

Question 10

An hypothesis test using 95 percent confidence has a significance level equal to __________.

Accepted Answer

A) 1 
B) 0.05 
C) 0.01 
D) 0.95

Question 11

If Excel estimates the demand function for a product to be: Qd = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.

Accepted Answer

A) True 
 B)False

Question 12

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Qd = 650 - (15.25 × P). The estimated regression equation suggests which of the following is true?

Accepted Answer

A) The price of grand mocha coffees represents the dependent variable in the regression equation. 
B) If a price of $5 is charged, the predicted weekly demand of grand mocha coffees is 453.75. 
C) There is a positive relationship between the price of grand mocha coffees and the quantity demanded. 
D) As the price of grand mocha coffees increases, the quantity demanded decreases.

Question 13

Regression analysis can help managers make decisions in the short run, but not in the long run.

Accepted Answer

A) True 
 B)False

Question 14

If the absolute value of the t- statistic exceeds critical value, the null hypothesis is rejected.

Accepted Answer

A) True 
 B)False

Question 15

The table above shows a sample of actual data used to estimate the demand function for Happy Clams seafood dinners.
-Refer to the table above. Excel estimates the demand function for Happy Clams seafood dinners to be: Qd = 1,200 - (20.50 × P). Which of the following statements is true?

Accepted Answer

A) When the price is equal to $18, the actual quantity sold exceeds the predicted quantity sold. 
B) When the price is equal to $18, the estimated residual is zero. 
C) When the price is equal to $18, the predicted quantity sold exceeds the actual quantity sold. 
D) When the price is equal to $18, the actual quantity sold equals the predicted quantity sold.

Question 16

If the income elasticity of demand for a good is 0.5, an economic recession will increase the demand for the good.

Accepted Answer

A) True 
 B)False

Question 17

Omitting relevant variables from the regression analysis can bias the regression results.

Accepted Answer

A) True 
 B)False

Question 18

You are the owner of a boutique clothing store and estimate the price elasticity of demand for your clothing to be 2.50 and the income elasticity of demand for your clothing to be 1.55. If you increase the price of your clothing, you should expect which of the following to occur?

Accepted Answer

A) an increase in your total revenue 
B) no change in your total revenue 
C) an increase in the quantity demanded of your clothing 
D) a decrease in your total revenue

Question 19

The goal of regression analysis is to make the residuals as small as possible.

Accepted Answer

A) True 
 B)False

Question 20

Using Excel, the manager of Quick Breaks Coffees has estimated the daily demand function for its regular coffees; the results are shown in the table above. Which of the following statements is correct?

Accepted Answer

A) The manager can be 95 percent confident that the true slope coefficient for price is positive. 
B) The manager can be 95 percent confident that the true slope coefficient for price lies between - 24.01 and - 20.96. 
C) The manager can be 95 percent confident that the true slope coefficient for price is greater than - 24.01. 
D) The manager can be 95 percent confident that the true slope coefficient for price is equal to zero.

Exam 3: Measuring and Using Demand

Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?

All of the following are true regarding the price elasticity of demand except which one?

Big Poppa's BBQ Sandwiches is a local restaurant specializing in BBQ sandwiches. Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Q^d = 1,576.55 - (25.50 × P) . The estimated regression equation suggests which of the following is true?

The larger the standard error for a coefficient, the larger the confidence level.

For any change in a business cycle, the percentage change in demand for a good with an income elasticity of 2.0 will be larger than the percentage change in demand for a good with an income elasticity of 1.0.

Consider a 20 percent increase in the price of a 2 pound bag of sugar and a 20 percent increase in the price of first- class airline travel. In response to the price changes, which of the following is most likely to be true?

If an 8 percent decrease in price leads to a 4 percent increase in the quantity demanded of the good, as a result of the price change, the total revenue for this product will________ .

An hypothesis test using 95 percent confidence has a significance level equal to __________.

If Excel estimates the demand function for a product to be: Q^d = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Q^d = 650 - (15.25 × P) . The estimated regression equation suggests which of the following is true?

Regression analysis can help managers make decisions in the short run, but not in the long run.

If the absolute value of the t- statistic exceeds critical value, the null hypothesis is rejected.

The table above shows a sample of actual data used to estimate the demand function for Happy Clams seafood dinners. -Refer to the table above. Excel estimates the demand function for Happy Clams seafood dinners to be: Q^d = 1,200 - (20.50 × P) . Which of the following statements is true?

If the income elasticity of demand for a good is 0.5, an economic recession will increase the demand for the good.

Omitting relevant variables from the regression analysis can bias the regression results.

You are the owner of a boutique clothing store and estimate the price elasticity of demand for your clothing to be 2.50 and the income elasticity of demand for your clothing to be 1.55. If you increase the price of your clothing, you should expect which of the following to occur?

The goal of regression analysis is to make the residuals as small as possible.

Using Excel, the manager of Quick Breaks Coffees has estimated the daily demand function for its regular coffees; the results are shown in the table above. Which of the following statements is correct?

Exam 3: Measuring and Using Demand

Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?

All of the following are true regarding the price elasticity of demand except which one?

Big Poppa's BBQ Sandwiches is a local restaurant specializing in BBQ sandwiches. Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Qd = 1,576.55 - (25.50 × P) . The estimated regression equation suggests which of the following is true?

The larger the standard error for a coefficient, the larger the confidence level.

For any change in a business cycle, the percentage change in demand for a good with an income elasticity of 2.0 will be larger than the percentage change in demand for a good with an income elasticity of 1.0.

Consider a 20 percent increase in the price of a 2 pound bag of sugar and a 20 percent increase in the price of first- class airline travel. In response to the price changes, which of the following is most likely to be true?

If an 8 percent decrease in price leads to a 4 percent increase in the quantity demanded of the good, as a result of the price change, the total revenue for this product will________ .

An hypothesis test using 95 percent confidence has a significance level equal to __________.

If Excel estimates the demand function for a product to be: Qd = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Qd = 650 - (15.25 × P) . The estimated regression equation suggests which of the following is true?

Regression analysis can help managers make decisions in the short run, but not in the long run.

If the absolute value of the t- statistic exceeds critical value, the null hypothesis is rejected.

The table above shows a sample of actual data used to estimate the demand function for Happy Clams seafood dinners. -Refer to the table above. Excel estimates the demand function for Happy Clams seafood dinners to be: Qd = 1,200 - (20.50 × P) . Which of the following statements is true?

If the income elasticity of demand for a good is 0.5, an economic recession will increase the demand for the good.

Omitting relevant variables from the regression analysis can bias the regression results.

You are the owner of a boutique clothing store and estimate the price elasticity of demand for your clothing to be 2.50 and the income elasticity of demand for your clothing to be 1.55. If you increase the price of your clothing, you should expect which of the following to occur?

The goal of regression analysis is to make the residuals as small as possible.

Using Excel, the manager of Quick Breaks Coffees has estimated the daily demand function for its regular coffees; the results are shown in the table above. Which of the following statements is correct?

Big Poppa's BBQ Sandwiches is a local restaurant specializing in BBQ sandwiches. Using Excel, Big Poppa's estimates the weekly demand function for its BBQ sandwiches to be Q^d = 1,576.55 - (25.50 × P) . The estimated regression equation suggests which of the following is true?

If Excel estimates the demand function for a product to be: Q^d = 1,500 - (5 × P), the estimated regression equation indicates that the Law of Demand does not hold.

Big City Java is a local coffee bar. Using Excel, the manager of Big City Java estimates the weekly demand function for their grand mocha coffees to be Q^d = 650 - (15.25 × P) . The estimated regression equation suggests which of the following is true?

The table above shows a sample of actual data used to estimate the demand function for Happy Clams seafood dinners. -Refer to the table above. Excel estimates the demand function for Happy Clams seafood dinners to be: Q^d = 1,200 - (20.50 × P) . Which of the following statements is true?