Managerial Economics Applications Strategies And Tactics 14th Edition by James – Test Bank

 

 

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Sample Test

Chapter_3___Demand_Analysis   Multiple Choice

 

1. Suppose we estimate that the demand elasticity for fine leather jackets is -.7 at their current prices.  Then we know that:   a. a 1% increase in price reduces quantity sold by .7%.   b. no one wants to buy leather jackets.   c. demand for leather jackets is elastic.   d. a cut in the prices will increase total revenue.   e. leather jackets are luxury items.   ANSWER:   a POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

2. If demand were inelastic, then we should immediately:   a. cut the price.   b. keep the price where it is.   c. go to the Nobel Prize Committee to show we were the first to find an upward sloping demand curve.   d. stop selling it since it is inelastic.   e. raise the price.   ANSWER:   e POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

3. In this problem, demonstrate your knowledge of percentage rates of change of an entire demand function (HINT: %ΔQ = EP•%ΔP + EY•%ΔY).  You have found that the price elasticity of motor control devices at Allen-Bradley Corporation is -2, and that the income elasticity is a +1.5.  You have been asked to predict sales of these devices for one year into the future.  Economists from the Conference Board predict that income will be rising 3% over the next year, and AB’s management is planning to raise prices 2%.  You expect that the number of AB motor control devices sold in one year will:   a. fall .5%.   b. not change.   c. rise 1%r.   d. rise 2%.   e. rise .5%.   ANSWER:   e POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   Cross Elasticity of Demand KEYWORDS:   BLOOMS: Application DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

4. A linear demand for lake front cabins on a nearby lake is estimated to be:  QD = 900,000 – 2P.  What is the point price elasticity for lake front cabins at a price of P = $300,000?   [HINT: Ep = (∂Q/∂P)(P/Q)]   a. EP = -3.0   b. EP = -2.0   c. EP = -1.0   d. EP = -0.5   e. EP = 0   ANSWER:   b POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

5. Property taxes are the product of the tax rate (T) and the assessed value (V).  The total property tax collected in your city (P) is:  P = T•V.   If the value of properties rise 4% and if Mayor and City Council reduces the property the tax rate by 2%, what happens to the total amount of property tax collected?  [HINT:  the percentage rate of change of a product is approximately the sum of the percentage rates of change.}   a. It rises 6 %.   b. It rises 4 %.   c. It rises 3 %.   d. It rises 2 %   e. If falls 2%.   ANSWER:   d POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   Cross Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

6. Demand is given by QD = 620 – 10·P and supply is given by QS = 100 + 3·P.  What is the price and quantity when the market is in equilibrium?   a. The price will be $30 and the quantity will be 132 units.   b. The price will be $11 and the quantity will be 122 units.   c. The price will be $40 and the quantity will be 220 units.   d. The price will be $35 and the quantity will be 137 units   e. The price will be $10 and the quantity will be 420 units.   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   BLOOM’S: Comprehension KEYWORDS:   BPROG: Analytic DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

7. Which of the following would tend to make demand INELASTIC?   a. the amount of time analyzed is quite long   b. there are lots of substitutes available   c. the product is highly durable   d. the proportion of the budget spent on the item is very small   e. no one really wants the product at all   ANSWER:   d POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

8. Which of the following best represents management’s objective(s) in utilizing demand analysis?   a. it provides insights necessary for the effective manipulation of demand   b. it helps to measure the efficiency of the use of company resources   c. it aids in the forecasting of sales and revenues   d. a and b   e. a and c   ANSWER:   e POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Income Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/23/2016 3:14 PM

 

9. Identify the reasons why the quantity demanded of a product increases as the price of that product decreases.   a. as the price declines, the real income of the consumer increases   b. as the price of product A declines, it makes it more attractive than product B   c. as the price declines, the consumer will always demand more on each successive price reduction   d. a and b   e. a and c   ANSWER:   d POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Demand Relationships KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/23/2016 3:15 PM

 

10. An increase in the quantity demanded could be caused by:   a. an increase in the price of substitute goods   b. a decrease in the price of complementary goods   c. an increase in consumer income levels   d. all of the above   e. none of the above   ANSWER:   d POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Demand Relationships KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

11. Goods having a negative calculated income elasticity are…   a. superior goods   b. producers’ goods   c. nondurable goods   d. inferior goods   e. none of the above   ANSWER:   d POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Income Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/20/2016 12:21 PM

 

12. If the cross price elasticity measured between items A and B is positive, the two products are referred to as:   a. complements   b. substitutes   c. inelastic as compared to each other   d. both b and c   e. a, b, and c   ANSWER:   b POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Cross Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/23/2016 3:17 PM

 

13. When demand is ____ a percentage change in ____ is exactly offset by the same percentage change in ____ demanded, the net result being a constant total consumer expenditure.   a. elastic; price; quantity   b. unit elastic; price; quantity   c. inelastic; quantity; price   d. inelastic; price; quantity   e. none of the above   ANSWER:   b POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

14. Marginal revenue (MR) is ____ when total revenue is maximized.   a. greater than one   b. equal to one   c. less than zero   d. equal to zero   e. equal to minus one   ANSWER:   d POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

15. The factor(s) which cause(s) a movement along the demand curve include(s):   a. increase in level of advertising   b. decrease in price of complementary goods   c. increase in consumer disposable income   d. decrease in price of the good demanded   e. all of the above   ANSWER:   d POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Demand Relationships KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

16. An increase in each of the following factors would normally provide a subsequent increase in quantity demanded, except:   a. price of substitute goods   b. level of competitor advertising   c. consumer income level   d. consumer desires for goods and services   e. a and b   ANSWER:   b POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/23/2016 3:19 PM

 

17. Durable goods are:   a. consumers’ goods   b. raw materials combined to produce consumer goods   c. those that must be replaced after each use   d. those that may be stored and repaired   e. none of the above   ANSWER:   d POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Demand Relationships KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/20/2016 12:52 PM

 

18. The demand for durable goods tends to be more price elastic than the demand for non-durables.   a. true   b. false   ANSWER:   a POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Demand Relationships KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   7/23/2016 3:27 PM

 

19. A price elasticity (ED) of −1.50 indicates that for a ____ increase in price, quantity demanded will ____ by ____.   a. one percent; increase; 1.50 units   b. one unit; increase; 1.50 units   c. one percent; decrease; 1.50 percent   d. one unit; decrease; 1.50 percent   e. ten percent; increase; fifteen percent   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

20. Those goods having a calculated income elasticity that is negative are called:   a. producers’ goods   b. durable goods   c. inferior goods   d. nondurable goods   e. none of the above   ANSWER:   c POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Income Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

21. An income elasticity (Ey) of 2.0 indicates that for a ____ increase in income, ____ will increase by ____.   a. one percent; quantity supplied; two units   b. one unit; quantity supplied; two units   c. one percent; quantity demanded; two percent   d. one unit; quantity demanded; two units   e. ten percent; quantity supplied; two percent   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Income Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

22. When demand elasticity is ____ in absolute value (or ____), an increase in price will result in a(n) ____ in total revenues.   a. less than 1; elastic; increase   b. more than 1; inelastic; decrease   c. less than 1; elastic; decrease   d. less than 1; inelastic; increase   e. none of the above   ANSWER:   d POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

23. Empirical estimates of the price elasticity of demand [in Table 3.4] suggest that the demand for household consumption of alcoholic beverages is:   a. highly price elastic   b. price inelastic   c. unitarily elastic   d. an inferior good   e. none of the above   ANSWER:   b POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

24. Auto dealers slash prices at the end of the model year in response to deficient demand/excess inventory but restaurants facing the same problem slash production because   a. auto customers are less price sensitive than restaurant customers   b. price elasticity of demand (in absolute values) is higher for auto than restaurant customers   c. price elasticity of supply is lower in auto than in restaurants   d. restaurant food spoils quickly and is much more perishable   e. price elasticity of supply in autos is smaller than the absolute value of price elasticity of demand but    the reverse is true for restaurants   ANSWER:   e POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

25. Songwriters and composers press music companies to lower the price for music downloads because   a. demand for on-line music is inelastic   b. profits are maximized where price elasticity of demand is -1.0   c. songwriter royalties are a percentage of sales revenue   d. profits and total revenue are maximized at different quantities   e. profits are maximized at the same prices as sales revenue   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

26. Which of the following demand factors are under the control of management?   a. ​price of product   b. ​advertising   c. price of competitors’ products   d. ​customer service   e. all except c   ANSWER:   e POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   7/20/2016 1:19 PM DATE MODIFIED:   7/20/2016 1:25 PM

 

27. Factors affecting the price elasticity of demand include all of these EXCEPT:   a. percentage of the consumer’s budget   b. ​the availability and closeness of substitutes   c. ​positioning as income inferior   d. ​time period of adjustment   e. ​all of the above affect the price elasticity of demand   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   7/20/2016 1:19 PM DATE MODIFIED:   7/20/2016 1:30 PM

 

Essay

 

28. The manager of the Sell-Rite drug store accidentally mismarked a shipment of 20-pound bags of charcoal at $4.38 instead of the regular price of $5.18. At the end of a week, the store’s inventory of 200 bags of charcoal was completely sold out. The store normally sells an average of 150 bags per week. (a) What is the store’s arc elasticity of demand for charcoal? (b) Give an economic interpretation of the numerical value obtained in part (a)   ANSWER:     (a)       Q1 = 150          P1 = $5.18          Q2 = 200          P2 = $4.38           (b) A 1 percent increase in price will result in a 1.71 percent decrease in demand for charcoal. POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Essay HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPRPOG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Analysis DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

29. The Future Flight Corporation manufactures a variety of Frisbees selling for $2.98 each. Sales have averaged 10,000 units per month during the last year. Recently Future Flight’s closest competitor, Soaring Free Company, cut its prices on similar Frisbees from $3.49 to $2.59. Future Flight noticed that its sales declined to 8,000 units per month after the price cut. (a) What is the arc cross elasticity of demand between Future Flight’s and Soaring Free’s Frisbees? (b) If Future Flight knows the arc price elasticity of demand for its Frisbees is −2.2, what price would they have to charge in order to obtain the same level of sales as before Soaring Free’s price cut?   ANSWER:     (a)       QA1 = 10,000          PB1 = $3.49          QA2 = 8,000          PB2 = $2.59           (b)       ED = −2.2          Q1 = 8,000          P1 = 2.98          Q2 = 10,000       POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Essay HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPRPOG: Analysis TOPICS:   Cross Elasticity of Demand KEYWORDS:   BLOOM’S: Analysis DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

30. The British Automobile Company is introducing a brand new model called the “London Special.” Using the latest forecasting techniques, BAC economists have developed the following demand function for the “London Special”: QD = 1,200,000 − 40P What is the point price elasticity of demand at prices of (a) $8,000 and (b) $10,000? ANSWER:     (a)     (b) POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Essay HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPRPOG: Analysis TOPICS:   The Price Elasticity of Demand KEYWORDS:   BLOOM’S: Analysis DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

31. Hanna Corporation markets a compact microwave oven. In 2010 they sold 23,000 units at $375 each. Per capita disposable income in 2010 was $6,750. Hanna economists have determined that the arc price elasticity for this microwave oven is −1.2. (a) In 2011 Hanna is planning to lower the price of the microwave oven to $325. Forecast sales volume for 2011 assuming that all other things remain equal. (b) However, in checking with government economists, Hanna finds that per capita disposable income is expected to rise to $7,000 in 2011. In the past the company has observed an arc income elasticity of +2.5 for microwave ovens. Forecast 2011 sales given that the price is reduces to $325 and that per capita disposable income increases to $7,000. Assume that the price and income effects are independent and additive.   ANSWER:     (a)       Q1 = 23,000          P1 = $375          P2 = $325           (b) Price effect             Income effect             Y2 = 7,000          Y1 = 6,750         Net effect = Price effect + Income effect = .1714 + .0909 = .2623     Using the initial quantity (Q1 = 23,000) as the base in computing the percentage change yields:           Using the average quantity [(Q1 + Q2)/2] as the base in computing the percentage change yields:       POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Essay HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPRPOG: Analysis TOPICS:   The Combined Effect of Demand Elasticity KEYWORDS:   BLOOM’S: Analysis DATE CREATED:   6/21/2016 8:43 AM DATE MODIFIED:   6/21/2016 8:43 AM

 

Chapter_4___Estimating_Demand Multiple Choice

 

1. 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. Ln Q = 2.45 -0.67 Ln P + . 45 Ln Y  – .34 Ln Pcars (.20)        (.10)        (.25)   Where Q is gallons demanded, P is price per gallon, Y is disposable income, and Pcars is a price index for cars.  Based on this information, which is NOT correct?   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.   ANSWER:   e POINTS:   1 DIFFICULTY:   Challenging QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   Statistical Estimation of the Demand Function KEYWORDS:   BLOOM’S: Analysis DATE CREATED:   6/30/2016 9:40 AM DATE MODIFIED:   6/30/2016 9:40 AM

 

2. In a cross section regression of 48 states, the following linear demand for per-capita cans of soda was found:  Cans = 159.17 – 102.56 Price + 1.00 Income + 3.94Temp     Coefficients Standard Error t Stat Intercept 159.17 94.16 1.69 Price -102.56 33.25 -3.08 Income 1.00 1.77 0.57 Temperature 3.94 0.82 4.83   R-Sq = 54.1%     R-Sq(adj) = 51.0%   From the linear regression results in the cans case above, we know that:   a. Price is insignificant   b. Income is significant   c. Temp is significant   d. As price rises for soda, people tend to drink less of it   e. All of the coefficients are significant   ANSWER:   d POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   Statistical Estimation of the Demand Function KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/30/2016 9:40 AM DATE MODIFIED:   6/30/2016 9:40 AM

 

3. 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:   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.   ANSWER:   c POINTS:   1 DIFFICULTY:   Moderate QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Reflective Thinking – BPROG: Analysis TOPICS:   Statistical Estimation of the Demand Function KEYWORDS:   BLOOM’S: Comprehension DATE CREATED:   6/30/2016 9:40 AM DATE MODIFIED:   6/30/2016 9:40 AM

 

4. The principal econometric techniques used in measuring demand relationships are:   a. the standard deviation   b. regression   c. correlation analysis   d. the coefficient of determination   e. both b and c   ANSWER:   e POINTS:   1 DIFFICULTY:   Easy QUESTION TYPE:   Multiple Choice HAS VARIABLES:   False NATIONAL STANDARDS:   United States – BPROG: Analytic TOPICS:   Statistical Estimation of the Demand Function KEYWORDS:   BLOOM’S: Knowledge DATE CREATED:   6/30/2016 9:40 AM DATE MODIFIED:   7/27/2016 12:40 PM