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When Estimating a Demand Function for a Good Where Quantity

Question 54

Multiple Choice

When estimating a demand function for a good where quantity demanded is a linear function of the price, you should


A) not include an intercept because the price of the good is never zero.
B) use a one-sided alternative hypothesis to check the influence of price on quantity.
C) use a two-sided alternative hypothesis to check the influence of price on quantity.
D) reject the idea that price determines demand unless the coefficient is at least 1.96.

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