Question 1

When marginal revenue is negative,demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  There is not sufficient information to classify the elasticity of demand. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  There is not sufficient information to classify the elasticity of demand.

Question 2

You are the manager of a popular hat company.You know that the advertising elasticity of demand for your product is 0.25.How much will you have to increase advertising in order to increase demand by 5 percent?

Accepted Answer

A)  0.05 percent 
B)  20 percent 
C)  25 percent 
D)  1.25 percent 
A)  0.05 percent 
B)  20 percent 
C)  25 percent 
D)  1.25 percent

Question 3

The following estimates have been obtained for the market demand for cereal:
 ln Q = 9.01 - 0.68 ln P + 0.75 ln A - 1.3 ln M,where Q is the quantity of cereal,P is the price of cereal,A is the level of advertising,and M is income.Based on this information,determine the effect on the consumption of cereal of
a.A 5 percent reduction in the price of cereal.
b.A 4 percent increase in income.
c.A 20 percent reduction in cereal advertising.

Accepted Answer

a.Since the own price elasticity is −0.6

Question 4

The demand for good X is given by ln Qxd = 120 − 0.9 ln Px + 1.5 ln Py − 0.7 ln M.Which of the following statements is correct?

Accepted Answer

A)  X has constant income elasticity. 
B)  An economic downturn will decrease demand for X. 
C)  A 15 percent increase in income would increase demand for X by 10.5 percent. 
D)  X has a constant income elasticity, and an economic downturn will decrease the demand for X. 
A)  X has constant income elasticity. 
B)  An economic downturn will decrease demand for X. 
C)  A 15 percent increase in income would increase demand for X by 10.5 percent. 
D)  X has a constant income elasticity, and an economic downturn will decrease the demand for X.

Question 5

The demand function in the accompanying table is QXd = 100 ? 2PX.Based on this information,compute the total revenue when QX = 20 (point D). $\begin{array}{cccc}
\begin{array}{c}
\text { Good X } \
\left(\mathbf{P}_{\mathbf{x})}\right.
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { of GoodX } \
\left(\mathbf{Q}_{\mathbf{X}}\right)
\end{array} & \begin{array}{c}
\text { Own } \
\text { Price } \
\text { Elasticity }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue }
\end{array} \
5 & 100 & 0.00 & 0 \
\text { A } & 90 & -0.11 & 450 \
15 & 80 & -0.25 & 800 \
20 & 70 & -0.43 & 1050 \
25 & 60 & -0.67 & 1200 \
30 & 50 & \mathbf{C} & 1250 \
35 & \mathbf{B} & -1.50 & 1200 \
40 & 30 & -2.33 & 1050 \
45 & 20 & -4.00 & \mathbf{D} \
50 & 10 & -9.00 & 450 \
50 & 0 & -\infty & 0
\end{array}$

Accepted Answer

A)  $750 
B)  $800 
C)  $850 
D)  $900 
A)  $750 
B)  $800 
C)  $850 
D)  $900

Question 6

The elasticity that measures the responsiveness of consumer demand to changes in income is the:

Accepted Answer

A)  income elasticity. 
B)  own price elasticity. 
C)  cross-price elasticity. 
D)  neither the income elasticity, the own price elasticity, nor the cross-price elasticity. 
A)  income elasticity. 
B)  own price elasticity. 
C)  cross-price elasticity. 
D)  neither the income elasticity, the own price elasticity, nor the cross-price elasticity.

Question 7

The demand function in the accompanying table is QXd = 100 ? 2PX.Based on this information,compute the own price elasticity of demand when PX = $25 (point C). $\begin{array}{cccc}
\begin{array}{c}
\text { Good X } \
\left(\mathbf{P}_{\mathbf{x})}\right.
\end{array} & \begin{array}{c}
\text { Quantity } \
\text { of GoodX } \
\left(\mathbf{Q}_{\mathbf{X}}\right)
\end{array} & \begin{array}{c}
\text { Own } \
\text { Price } \
\text { Elasticity }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue }
\end{array} \
5 & 100 & 0.00 & 0 \
\text { A } & 90 & -0.11 & 450 \
15 & 80 & -0.25 & 800 \
20 & 70 & -0.43 & 1050 \
25 & 60 & -0.67 & 1200 \
30 & 50 & \mathbf{C} & 1250 \
35 & \mathbf{B} & -1.50 & 1200 \
40 & 30 & -2.33 & 1050 \
45 & 20 & -4.00 & \mathbf{D} \
50 & 10 & -9.00 & 450 \
50 & 0 & -\infty & 0
\end{array}$

Accepted Answer

A)  ?1.09 
B)  ?1 
C)  ?0.50 
D)  ?0.25 
A)  ?1.09 
B)  ?1 
C)  ?0.50 
D)  ?0.25

Question 8

Determine the t-statistic of the estimated slope coefficient for disposable income (point G)and whether that estimated slope coefficient is statistically significant at the 5 percent level. RY

$\begin{array}{l}
\hline \text { gression Statistics }\
\begin{array}{lr}
\hline\text { R } & 0.971 \
\text { e} & \mathbf{A} \
\text { R-Square }& \mathbf{B} \
\text { Error } &30.462\
\text { ions } & 51\
\hline
\end{array}\end{array}$

$\begin{array}{rrrrrr}
\hline&\text { df } &  {\text { SS }} & {\text { MS }} & \boldsymbol{F} & {\text { Signiticance  F}} \
\hline\text { on }& \text { C } & 747851.57 & 373925.79 & 402.98 & 9.89 \mathrm{E}-31 \
&48 & \text { D } & 927.91 & & \
&50 & 792391.11 & & & \
\hline
\end{array}$

$\begin{array}{lrrrrrr}
\hline &\text { Coefficients } & \begin{array}{c}
\text { Standard } \
\text { Error }
\end{array} &{\text { t Stat }} & \text { P-value } & \text { Lower 95\% } & \text { Upper 95\% } \
\hline &\mathbf{E} & 62.13 & 26.79 & 1.60 \mathrm{E}-30 & 1539.66 & 1789.51 \
\text { Roses }&-6.68 & \mathbf{F} & -1.41 & 1.64 \mathrm{E}-01 & -16.16 & 2.81 \
\text { le Income }&9.73 & 0.34 & \mathbf{G} & 1.23 \mathrm{E}-31 & 9.04 & 10.42\
\hline
\end{array}$

Accepted Answer

A)  3.31 and statistically significant since the t-statistic is greater than 2 in absolute value. 
B)  0.03 and statistically insignificant since the t-statistic is less than 2 in absolute value. 
C)  3.31 and statistically insignificant since the P-value is less than 5 percent. 
D)  28.62 and statistically significant since the P-value is less than 5 percent. 
A)  3.31 and statistically significant since the t-statistic is greater than 2 in absolute value. 
B)  0.03 and statistically insignificant since the t-statistic is less than 2 in absolute value. 
C)  3.31 and statistically insignificant since the P-value is less than 5 percent. 
D)  28.62 and statistically significant since the P-value is less than 5 percent.

Question 9

The short-run response of quantity demanded to a change in price is usually:

Accepted Answer

A)  the same as the long-run response. 
B)  less than the long-run response. 
C)  greater than the long-run response. 
D)  None of the preceding statements is correct. 
A)  the same as the long-run response. 
B)  less than the long-run response. 
C)  greater than the long-run response. 
D)  None of the preceding statements is correct.

Question 10

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse)demand function is −$200.Then we know that the own price elasticity of demand is:

Accepted Answer

A)  −0.5. 
B)  −1. 
C)  2. 
D)  It cannot be determined from the information contained in the question. 
A)  −0.5. 
B)  −1. 
C)  2. 
D)  It cannot be determined from the information contained in the question.

Question 11

Suppose the demand for good x is ln Qxd = 21 − 0.8 ln Px − 1.6 ln Py + 6.2 ln M + 0.4 ln Ax.Then we know goods x and y are:

Accepted Answer

A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods. 
A)  substitutes. 
B)  complements. 
C)  normal goods. 
D)  inferior goods.

Question 12

Suppose the demand for good x is ln Qxd = 21 − 0.8 ln Px − 1.6 ln Py + 6.2 ln M + 0.4 ln Ax.Then we know good x is:

Accepted Answer

A)  an inferior good. 
B)  an elastic good. 
C)  a normal good. 
D)  a Giffen good. 
A)  an inferior good. 
B)  an elastic good. 
C)  a normal good. 
D)  a Giffen good.

Question 13

An income elasticity less than zero tells us that the good is:

Accepted Answer

A)  a normal good. 
B)  a Giffen good. 
C)  an inferior good. 
D)  an inelastic good. 
A)  a normal good. 
B)  a Giffen good. 
C)  an inferior good. 
D)  an inelastic good.

Question 14

If the demand function for a particular good is Q = 25 − 10P,then the price elasticity of demand (in absolute value)at a price of $1 is:

Accepted Answer

A)  8. 
B)  2. 
C)  2/3. 
D)  1/8. 
A)  8. 
B)  2. 
C)  2/3. 
D)  1/8.

Question 15

The demand for good X is estimated to be Qxd = 10,000 − 4PX + 5PY + 2M + AX, where PX is the price of X,PY is the price of good Y,M is income,and AX is the amount of advertising on X.Suppose the present price of good X is $50,PY = $100,M = $25,000,and AX = 1,000 units.Based on this information,good X is:

Accepted Answer

A)  an inferior good. 
B)  a normal good. 
C)  a Giffen good. 
D)  a regular good. 
A)  an inferior good. 
B)  a normal good. 
C)  a Giffen good. 
D)  a regular good.

Question 16

The demand for good X has been estimated to be ln Qxd = 100 − 2.5 ln PX + 4 ln PY + ln M.The own price elasticity of good X is:

Accepted Answer

A)  −2.5. 
B)  4.0. 
C)  −2.5 percent. 
D)  4.0 percent. 
A)  −2.5. 
B)  4.0. 
C)  −2.5 percent. 
D)  4.0 percent.

Question 17

Each week Bill buys exactly 7 bottles of cola regardless of its price.Bill's own price elasticity of demand for cola IN ABSOLUTE VALUE is:

Accepted Answer

A)  greater than 1. 
B)  less than 1. 
C)  1. 
D)  zero. 
A)  greater than 1. 
B)  less than 1. 
C)  1. 
D)  zero.

Question 18

If a price increase from $8 to $10 causes quantity demanded to fall from 500 to 400,what is the absolute value of the own price elasticity at a price of $10?

Accepted Answer

A)  0.80 
B)  1.25 
C)  1.00 
D)  0.75 
A)  0.80 
B)  1.25 
C)  1.00 
D)  0.75

Question 19

The demand for good X is estimated to be Qxd = 10,000 − 4PX + 5PY + 2M + AX, where PX is the price of X,PY is the price of good Y,M is income,and AX is the amount of advertising on X.Suppose the present price of good X is $50,PY = $100,M = $25,000,and AX = 1,000 units.Based on this information,we know that the demand for good X is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  neither elastic, inelastic, nor unitary elastic. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  neither elastic, inelastic, nor unitary elastic.

Question 20

If the price of ground beef falls from $7 to $4,and this leads to an increase in demand for beans from 80 to 120 cans,what is the cross-price elasticity of beans and ground beef at a ground beef price of $4?

Accepted Answer

A)  −0.87 
B)  1.21 
C)  0.52 
D)  −0.44 
A)  −0.87 
B)  1.21 
C)  0.52 
D)  −0.44

When marginal revenue is negative,demand is:

You are the manager of a popular hat company.You know that the advertising elasticity of demand for your product is 0.25.How much will you have to increase advertising in order to increase demand by 5 percent?

The demand for good X is given by ln Q_x^d = 120 − 0.9 ln P_x + 1.5 ln P_y − 0.7 ln M.Which of the following statements is correct?

The elasticity that measures the responsiveness of consumer demand to changes in income is the:

The short-run response of quantity demanded to a change in price is usually:

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse)demand function is −$200.Then we know that the own price elasticity of demand is:

Suppose the demand for good x is ln Q_x^d = 21 − 0.8 ln P_x − 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x.Then we know goods x and y are:

Suppose the demand for good x is ln Q_x^d = 21 − 0.8 ln P_x − 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x.Then we know good x is:

An income elasticity less than zero tells us that the good is:

If the demand function for a particular good is Q = 25 − 10P,then the price elasticity of demand (in absolute value)at a price of $1 is:

The demand for good X has been estimated to be ln Q_x^d = 100 − 2.5 ln P_X + 4 ln P_Y + ln M.The own price elasticity of good X is:

Each week Bill buys exactly 7 bottles of cola regardless of its price.Bill's own price elasticity of demand for cola IN ABSOLUTE VALUE is:

If a price increase from $8 to $10 causes quantity demanded to fall from 500 to 400,what is the absolute value of the own price elasticity at a price of $10?

If the price of ground beef falls from $7 to $4,and this leads to an increase in demand for beans from 80 to 120 cans,what is the cross-price elasticity of beans and ground beef at a ground beef price of $4?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

Exam 3: Quantitative Demand Analysis

When marginal revenue is negative,demand is:

You are the manager of a popular hat company.You know that the advertising elasticity of demand for your product is 0.25.How much will you have to increase advertising in order to increase demand by 5 percent?

The demand for good X is given by ln Qxd = 120 − 0.9 ln Px + 1.5 ln Py − 0.7 ln M.Which of the following statements is correct?

The elasticity that measures the responsiveness of consumer demand to changes in income is the:

The short-run response of quantity demanded to a change in price is usually:

Suppose the equilibrium price in the market is $200 and the marginal revenue associated with the linear (inverse)demand function is −$200.Then we know that the own price elasticity of demand is:

Suppose the demand for good x is ln Qxd = 21 − 0.8 ln Px − 1.6 ln Py + 6.2 ln M + 0.4 ln Ax.Then we know goods x and y are:

Suppose the demand for good x is ln Qxd = 21 − 0.8 ln Px − 1.6 ln Py + 6.2 ln M + 0.4 ln Ax.Then we know good x is:

An income elasticity less than zero tells us that the good is:

If the demand function for a particular good is Q = 25 − 10P,then the price elasticity of demand (in absolute value)at a price of $1 is:

The demand for good X has been estimated to be ln Qxd = 100 − 2.5 ln PX + 4 ln PY + ln M.The own price elasticity of good X is:

Each week Bill buys exactly 7 bottles of cola regardless of its price.Bill's own price elasticity of demand for cola IN ABSOLUTE VALUE is:

If a price increase from $8 to $10 causes quantity demanded to fall from 500 to 400,what is the absolute value of the own price elasticity at a price of $10?

If the price of ground beef falls from $7 to $4,and this leads to an increase in demand for beans from 80 to 120 cans,what is the cross-price elasticity of beans and ground beef at a ground beef price of $4?

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

Advanced Topics in Business Strategy

A Managers Guide to Government in the Marketplace

Filters

The demand for good X is given by ln Q_x^d = 120 − 0.9 ln P_x + 1.5 ln P_y − 0.7 ln M.Which of the following statements is correct?

Suppose the demand for good x is ln Q_x^d = 21 − 0.8 ln P_x − 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x.Then we know goods x and y are:

Suppose the demand for good x is ln Q_x^d = 21 − 0.8 ln P_x − 1.6 ln P_y + 6.2 ln M + 0.4 ln A_x.Then we know good x is:

The demand for good X has been estimated to be ln Q_x^d = 100 − 2.5 ln P_X + 4 ln P_Y + ln M.The own price elasticity of good X is: