Question 1

On a linear demand curve, the lower the price

Accepted Answer

A) the less elastic is demand. 
B) the more elastic is demand. 
C) the elasticity equals -1. 
D) the elasticity equals zero.

Question 2

When using extrapolation to forecast,

Accepted Answer

A) a time series of past observations is used. 
B) there is a large error term in the results. 
C) predictions can only be made about the future. 
D) dummy variables can skew the results.

Question 3

As prices change, the elasticity of supply describes the movement

Accepted Answer

A) of a shift in the supply curve. 
B) of the equilibrium price. 
C) along the supply curve. 
D) from a necessity to a luxury good.

Question 4

A regression specification must include

Accepted Answer

A) the choice of the dependent variable. 
B) the explanatory variable(s). 
C) the functional relationship. 
D) All of the above.

Question 5

A regression analysis with ________ explanatory variable(s)is called a ________.

Accepted Answer

A) two or less; limited regression 
B) exactly two; binomial least squares regression 
C) one; dependent regression 
D) two or more; multivariate regression

Question 6

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) -80.0. 
C) -0.80. 
D) -10.0.

Question 7

When selecting explanatory variables to include in a regression,

Accepted Answer

A) you should pick all observable variables available. 
B) you should pick all observable variables that are likely to have a meaningful impact on the dependent variable. 
C) ignore all variables that have t-statistics less than the critical value. 
D) ignore variables that have an R2 less than 1.

Question 8

Horizontal and vertical demand curves

Accepted Answer

A) have constant elasticities. 
B) are not possible in the real world. 
C) have elasticities that change with price. 
D) cannot have their elasticities computed using the point method.

Question 9

Which of the following is most likely to be TRUE about relative income elasticities of demand for oatmeal and diamond bracelets?

Accepted Answer

A) Income elasticity of demand for diamond bracelets exceeds that of oatmeal. 
B) Income elasticity of demand for oatmeal exceeds that of diamond bracelets. 
C) Income elasticity of demand for diamond bracelets equals that of oatmeal. 
D) It is not possible to make any prediction about relative income elasticities.

Question 10

If the demand curve for slices of pizza is given as Q = 300 - 16p, then the point elasticity of demand when price is $1.50 is

Accepted Answer

A) -24. 
B) -16. 
C) -0.0054. 
D) -0.087.

Question 11

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

Accepted Answer

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

Question 12

Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the point price elasticity of demand equals

Accepted Answer

A) -1.5. 
B) -0.67. 
C) -4. 
D) -2.5.

Question 13

Forecasts based on an economic theory as opposed to historical data are called

Accepted Answer

A) causal econometric forecasts. 
B) non-time-series forecasts. 
C) dummy forecasts. 
D) explanatory variable forecasts.

Question 14

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

Accepted Answer

A) $0. 
B) $1. 
C) $2. 
D) $4.

Question 15

If demand is elastic,

Accepted Answer

A) then it changes very little in response to a price change. 
B) then it changes significantly in response to a price change. 
C) then demand is zero. 
D) then demand is infinite.

Question 16

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

Accepted Answer

A) positive. 
B) the quantity demanded when price is zero. 
C) the change in quantity demanded if price changes by 1. 
D) different at different points on the demand curve.

Question 17

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, calculate the arc price elasticity.

Accepted Answer

A) -1.92 
B) -1.64 
C) -4 
D) -2

Question 18

The goodness of the fit of a line is measured by the

Accepted Answer

A) R2 statistic. 
B) t-statistic. 
C) unbiased coefficient. 
D) standard error.

Question 19

If the elasticity of demand is -2.3 when calculated using the point elasticity method and -3.4 using the arc elasticity method, then

Accepted Answer

A) you should use the point elasticity. 
B) it is OK to use either one. 
C) there must be a mistake in the calculations. 
D) you should use the arc elasticity.

Question 20

-The above figure shows the demand curve for crude oil. If the market price is $10 a barrel, what is the price elasticity of demand?

Accepted Answer

A) -.02 
B) -1 
C) -10 
D) -500

Exam 3: Empirical Methods for Demand Analysis

On a linear demand curve, the lower the price

When using extrapolation to forecast,

As prices change, the elasticity of supply describes the movement

A regression specification must include

A regression analysis with explanatory variable(s) is called a .

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

When selecting explanatory variables to include in a regression,

Horizontal and vertical demand curves

Which of the following is most likely to be TRUE about relative income elasticities of demand for oatmeal and diamond bracelets?

If the demand curve for slices of pizza is given as Q = 300 - 16p, then the point elasticity of demand when price is $1.50 is

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

Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the point price elasticity of demand equals

Forecasts based on an economic theory as opposed to historical data are called

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

If demand is elastic,

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

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, calculate the arc price elasticity.

The goodness of the fit of a line is measured by the

If the elasticity of demand is -2.3 when calculated using the point elasticity method and -3.4 using the arc elasticity method, then

-The above figure shows the demand curve for crude oil. If the market price is $10 a barrel, what is the price elasticity of demand?

Exam 3: Empirical Methods for Demand Analysis

On a linear demand curve, the lower the price

When using extrapolation to forecast,

As prices change, the elasticity of supply describes the movement

A regression specification must include

A regression analysis with ________ explanatory variable(s) is called a ________.

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

When selecting explanatory variables to include in a regression,

Horizontal and vertical demand curves

Which of the following is most likely to be TRUE about relative income elasticities of demand for oatmeal and diamond bracelets?

If the demand curve for slices of pizza is given as Q = 300 - 16p, then the point elasticity of demand when price is $1.50 is

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

Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the point price elasticity of demand equals

Forecasts based on an economic theory as opposed to historical data are called

If the demand function for orange juice is expressed as Q = 2000 - 500p, where Q is quantity in gallons and p is price per gallon measured in dollars, then the demand for orange juice has a unitary elasticity when price equals

If demand is elastic,

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

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, calculate the arc price elasticity.

The goodness of the fit of a line is measured by the

If the elasticity of demand is -2.3 when calculated using the point elasticity method and -3.4 using the arc elasticity method, then

-The above figure shows the demand curve for crude oil. If the market price is $10 a barrel, what is the price elasticity of demand?

A regression analysis with explanatory variable(s) is called a .