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Multiple-Choice Questions Multiple-Choice Questions Multiple-Choice Questions |Rated A+
Chapter 1 Introduction
Multiple-Choice Questions
1) Which of the following is an example of how the question of "what goods and services to produce?" is answered by the command process?
A) government subsidies for affordable housing
B) laws regarding equal opportunity in employment
C) government allowance for the deduction of interest payments on private mortgages
D) government regulations concerning the dumping of industrial waste Answer:
2) Opportunity cost is best defined as
A) the amount given up when choosing one activity over all other alternatives.
B) the amount given up when choosing one activity over the next best alternative.
C) the opportunity to earn a profit that is greater than the one currently being made.
D) the amount that is given up when choosing an activity that is not as good as the next best alternative.
Answer:
3) In a market economy, which of the following is the most important factor affecting scarcity?
A) the needs and wants of consumers
B) the price of the product
C) the degree to which the government is involved in the allocation of resources.
D) All of the above are equally important.
Answer:
4) Which of the following is not considered by economists to be a basic resource or factor of production?
A) money B) machinery and equipment
C) technology D) unskilled labor
Answer:
5) Select the group that best represents the basic factors of production.
A) land, labor, capital, entrepreneurship B) land, labor, money, management skills
C) land, natural resources, labor, capital D) land, labor, capital, technology Answer:
6) Which of the statements below best illustrates the use of the market process in determining the allocation of scarce resources?
A) "Let's make this product because this is what we know how to do best."
B) "Although we're currently making a profit on the products we make, we should consider shifting to products where we can earn even more money."
C) "Everyone is opening video stores, why don't we?"
D) "We can't stop making this product. This product gave our company its start." Answer:
7) Which of the following is the best example of "what goods and services should be produced?"
A) the use of a capital intensive versus a labor intensive process of manufacturing textiles
B) the production of army helicopters versus the production of new commercial jet aircraft
C) the manufacturing of computer workstations in Hong Kong or in Germany
D) the leasing versus the purchasing of new capital equipment Answer:
8) Which of the following is the best example of "how should goods and services be produced?"
A) adherence to technical specifications in the production of jet aircraft
B) the production of jet aircraft for the air force or for a commercial airline
C) the use of additional full-time workers versus the use of supplementary part-time workers
D) the production of a new manufacturing facility Answer:
9) Which of the following is the best example of opportunity cost?
A) a company's expenditures on a training program for its employees
B) the rate of return on a company's investment
C) the amount of money that a company can earn by depositing excess funds in a money market fund
D) the amount of profit that a company forgoes when it decides to drop a particular product line in favor of another one
Answer:
10) From the standpoint of a soft drink company the question of "What goods and services should be produced?" is best represented by which of the following decisions?
A) whether or not to hire additional workers
B) whether or not to increase its advertising
C) whether or not to shut down selected manufacturing facilities
D) All of the above are examples.
E) None of the above are examples.
Answer:
11) Scarcity is a condition that exists when
A) there is a fixed supply of resources.
B) there is a large demand for a product.
C) resources are not able to meet the entire demand for a product.
D) All of the above.
Answer:
12) Managerial economics is best defined as
A) the study of economics by managers.
B) the study of the aggregate economic activity.
C) the study of how managers make decisions about the use of scarce resources.
D) All of the above are good definitions.
Answer:
13) In the text, the authors refer to "Stage II" of the process of changing economics as
A) demand management. B) cost management.
C) diminishing returns. D) profit taking.
Answer:
14) Which of the following is the best example of the "command" process?
A) MCI-Worldcom buys Sprint.
B) Striking auto workers force General Motors to shut down its factories.
C) Banks raise their fees on late payments by credit card holders.
D) The FCC requires local telephone companies to provide access to their local networks before being able to offer long distance service.
Answer:
15) A critical element of entrepreneurship (as opposed to managerial skills) is
A) leadership skills. B) risk taking.
C) technology. D) political skills.
Answer:
16) In the text, a key factor in the changing "economics of a business" is
A) the need to grow revenues. B) increasing competition.
C) rising labor costs. D) the need to expand market share.
Answer:
17) In the "four-stage" model of change," Stage III is represented by
A) deciding how much to markup costs to set a profitable product price.
B) cost-cutting and restructuring to maintain and improve production.
C) narrowing product lines to those offering the greatest revenue potential.
D) focusing on markets with the greatest growth potential.
Answer:
18) The economic concept of "opportunity cost" is most closely associated with which of the following management considerations?
A) market structure B) resource scarcity
C) product demand D) technology Answer:
19) Which of the following is the best example of the "traditional process"?
A) commercial bank mergers
B) minimum age limits for the purchase of alcoholic beverages
C) auctioning US Treasury bills
D) colleges and universities give admissions preferences to children of alumni Answer:
20) The best definition of economics is
A) how choices are made under conditions of scarcity.
B) how money is used.
C) how goods and services are produced.
D) how businesses maximize profits.
Answer:
21) Managerial economics is best defined as the economic study of
A) how businesses can make the most profits.
B) how businesses can decide on the best use of scarce resources.
C) how businesses can operate at the lowest costs.
D) how businesses can sell the most products.
Answer:
Analytical Questions
1) What economic conditions are relevant in managerial decision-making?
Answer: Such factors as market structure, supply and demand conditions, technology, government regulations, international factors, expectations about the future, and the macroeconomy are economic factors that play a role in managerial decision-making.
2) What factors lead to competitive advantage for a firm?
Answer: ost leadership (lower costs than competing firms), product differentiation, selection and focus on a market niche, outsourcing and merger strategies, and international focus or expansion are factors in the competitive advantage of the firm.
3) What are the typical types of risk faced by a firm?
Answer: anges in supply and demand conditions, changes in technology, increased competition, changes in interest rates and inflation rates, exchange rate changes, and political risk are typical types of risk faced by firms.
4) What are the four stages of change faced by firms?
Answer: Stage I: Market dominance, in which the only strategy required to earn a profit is
sufficient markup over cost. (Cost-plus)
Stage II: Technology and competition place pressures on the firm, often resulting in cost-cutting, downsizing, restructuring, and reengineering. (Cost management)
Stage III: Focus on growth of top lines of business. (Revenue management) Stage IV: Striving for continued profitable growth. (Revenue plus)
5) How do the three basic economic questions relate to the firm?
Answer: rms must choose WHAT goods and services to produce, HOW to produce them (through appropriate choice of resources and technology), and FOR WHOM they will be provided (what segment of the market on which to focus).
6) What other business disciplines are related to Managerial Economics?
Answer: counting, Finance, Management Science (Quantitative Methods), Management Strategies, Marketing
Chapter 2 The Firm and Its Goals
Multiple-Choice Questions
1) Transaction costs include
A) costs of negotiating contracts with other firms.
B) cost of enforcing contracts.
C) the existence of asset-specificity.
D) All of the above.
Answer:
2) A company will strive to minimize
A) transaction costs.
B) costs of internal operations.
C) total costs of transactions and internal operations combined.
D) variable costs.
Answer:
3) Company goals that are concerned with creating employee and customer satisfaction and maintaining a high degree of social responsibility are calledobjectives.
A) social B) noneconomic C) welfare D) public relations Answer:
4) risk involves variation in returns due to the ups and downs of the economy, the industry and the firm.
A) Structural B) Fluctuational C) Business D) Financial Answer:
5) risk concerns the variation in returns that is induced by leverage.
A) Business B) Premium C) Business D) Financial Answer:
6) Unlike an accountant, an economist measures costs on a(n)basis.
A) implicit B) replacement C) historical D) conservative Answer:
7) When a company manages its business in such a way that its cash flows over time, discounted at the appropriate discount rate, will cause the value of the company's common stock to be at a maximum, it is calledmaximization.
A) profit B) stockholder wealth
C) asset D) None of the above.
Answer:
8) When a firm earns a normal profit, its revenue is just enough to cover both itscost and itscost.
A) accounting; opportunity B) accounting; replacement
C) historical; replacement D) explicit; accounting Answer:
9) A large corporation's profit objective may not be profit or wealth maximization, because
A) stockholders have little power in corporate decision-making.
B) management is more interested in maximizing its own income.
C) managers are overly concerned with their own survival and may not take all prudent risks.
D) All of the above.
Answer:
10) Accounting costs
A) are historical costs. B) are replacements costs.
C) usually include implicit costs. D) usually include normal profits.
Answer:
11) The calculation of stockholder wealth involves
A) the time-value of money concept. B) the cash flow stream.
C) business and financial risk. D) All of the above.
Answer:
12) As an objective, the maximization of profits ignores
A) the timing of cash flows B) the time-value of money concept.
C) the riskiness of cash flows. D) All of the above.
Answer:
13) Another name for stockholder wealth maximization is
A) profit maximization.
B) maximization of earnings per share.
C) maximization of the value of the common stock.
D) maximization of cash flows.
Answer:
14) MVA (Market Value Added)
A) will always be a positive number. B) may be a negative number.
C) measures the market value of the firm. D) None of the above.
Answer:
15) Opportunistic behavior is best described as a firm
A) gathering as much information as possible before dealing with another entity.
B) attempting to make a profit from its dealings with another entity.
C) firm trying to take advantage of another entity in its dealings with it.
D) selecting another entity to deal with.
Answer:
16) Firms are organized to keep their costs as low as possible by
A) comparing external transactions costs with internal operating cost.
B) analyzing supply and demand conditions.
C) minimizing their use of borrowed funds.
D) utilizing the latest technology.
Answer:
17) The best example of an economic goal of a firm is
A) providing good products/services to its customers.
B) improving its public image.
C) increasing employee morale.
D) increasing shareholder wealth.
Answer:
18) Financial risk is associated with changes in
A) the demand for a firm's products.
B) a firm's debt.
C) a firm's labor costs.
D) government regulations of a firm's activities.
Answer:
19) A firm's "normal profit" is best characterized by the
A) average of a firm's profits over the past five years.
B) amount of profit necessary to keep the price of a firm's stock from changing.
C) amount of profit a firm could earn in its next best alternative activity.
D) the average amount of profit earned in the firm's industry.
Answer:
Analytical Questions
1) a. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 5%?
b. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 8%?
c. If a stock is expected to pay an annual dividend of $20 this year, what is the approximate present value of the stock, given that the discount rate is 8% and dividends are expected to grow at a rate of 2% per year?
Answer:
a. P = D/k = 20/.05 = $400 b. P = 20/.08 = $250
c. P = D1/(k - g) = 20/(.08 - .02) = $333.33
2) If a stock is expected to pay a dividend of $40 for the current year, what is the approximate present value of this stock, given at discount rate of 5% and a dividend growth rate of 3%?
Answer: P = $40/(0.05 - 0.03) = $40/0.02 = $2,000
3) Describe the difference between the Economic Value Added (EVA) and the Market Value Added (MVA) approach to determining stockholder wealth.
Answer: VA is the difference between a firm's return on total capital and its cost of capital, while MVA is the difference between the market value (equity plus debt) of a firm and
the amount of capital investors have paid into the company.
Chapter 3 Supply and Demand (Appendix 3A)
Multiple-Choice Questions
1) How long is the "short-run" time period in the economic analysis of the market?
A) three months or one business quarter
B) total time in which sellers already in the market respond to changes in demand and equilibrium price
C) total amount of time it takes new sellers to enter the market
D) total amount of time it takes original sellers to leave the market Answer:
2) A new taco-making machine that is similar in size and cost to hot dog carts has encouraged more street vendors to begin selling tacos. What short-run impact do you think this might have on the market for hot dogs?
A) decrease in the demand for hot dogs B) increase in the demand for hot dogs
C) decrease in the supply of hot dogs D) increase in the supply of hot dogs Answer:
3) Which of the following is not a nonprice determinant of demand?
A) tastes and preferences B) income
C) technology D) future expectations Answer:
4) Which of the following is not a nonprice determinant of supply?
A) costs B) technology
C) income D) future expectations Answer:
5) Which of the following statements is not true?
A) An increase in demand causes equilibrium price and quantity to rise.
B) A decrease in demand causes equilibrium price and quantity to fall.
C) An increase in supply causes equilibrium price to fall and quantity to rise.
D) A decrease in supply causes equilibrium price to rise and quantity to rise.
Answer:
6) A short-run time period is
A) the period of time in which sellers already in the market respond to a change in equilibrium price by adjusting the amount of their fixed inputs.
B) the amount of time it takes for the market price to reach a new equilibrium as a result of some initial change in supply or demand.
C) the amount of time it takes for sellers and buyers to decide on whether to enter a new market.
D) the amount of time it takes for buyers to change their purchasing habits as a result of a change in market price.
Answer:
7) Which of the following would cause a decrease in the demand for fish?
A) The price of red meat increases. B) The price of fish increases.
C) The price of chicken decreases. D) The number of fishing boats decreases.
Answer:
8) Which of the following would cause a short□run decrease in the quantity supplied of personal computers?
A) The price of workstations decreases.
B) The price of PC software decreases.
C) The number of PC manufacturers decreases.
D) The cost of manufacturing PCs decreases.
Answer:
9) Which of the following will not cause a short-run shift in the supply curve?
A) a change in the number of sellers B) a change in the cost of resources
C) a change in the price of the product D) a change in future expectations Answer:
10) In the short run, a change in the equilibrium price will
A) always lead to inflation.
B) cause a shift in the demand curve.
C) cause a shift in the supply curve.
D) cause a change in the quantity demanded or supplied.
Answer:
11) Which of the following applies most generally to supply in the long run?
A) Average cost must decline.
B) Sellers are able to make adjustments in all of their factors of production.
C) Sellers are only able to make adjustments in their variable factors of production.
D) All original sellers will leave the market.
Answer:
12) A movement along the demand curve may be caused by
A) a change in nonprice determinants of demand.
B) a change in consumer expectations.
C) a change in demand.
D) a change in supply.
Answer:
13) The rationing function of price
A) occurs when there is a movement of resources into or out of markets as a result of changes in the equilibrium market price.
B) is also known as the guiding function of price.
C) occurs when consumers change their tastes and preferences.
D) occurs only when the market experiences severe shortages.
Answer:
14) The switch to the use of HFCS from sugar in soft drinks was prompted in large part by its relatively lower price. Assuming a competitive market, what effect would this change have on the equilibrium price and output for soft drinks?
A) Price rises, output falls. B) Price falls, output rises.
C) Price rises, output rises. D) Price falls, output falls.
Answer:
15) Which of the following best describes the "guiding function" of price?
A) In response to the surplus or shortage in two markets, price serves as a "guiding function" by decreasing in one market and increasing in the other market in the short run.
B) The guiding function of price is the movement of resources into or out of markets in response to a change in the equilibrium price of a good or service.
C) The guiding function of price occurs when the market price changes to eliminate the imbalance between supply and demand caused by a shortage or surplus at the original price.
D) The guiding function usually occurs in the short run while the rationing function usually occurs in the long run.
Answer:
16) Which of the following best applies to the distinction between the "long run" and the "short run"?
A) The short run is a period of approximately 1-6 months while the long run is any time frame longer.
B) In the short run, only new firms may enter, while in the long□run firms may either enter or exit the market.
C) The rationing function of price is a short□run phenomenon whereas the guiding function is a long-run phenomenon.
D) All of the above statements are correct.
Answer:
17) Which of the following would indicate that price is temporarily below its market equilibrium?
A) There are a number of producers who are left with unwanted inventories.
B) There are a number of customers who must be placed on waiting lists for the product.
C) Firms decide to leave the market.
D) The government must step in and subsidize the product.
Answer:
18) Comparative statics analysis in economics is best illustrated as
A) the comparison of equilibrium points before and after changes in the market have occurred.
B) a comparison of two types of markets.
C) the comparison of the percentage of change in the one variable divided by the percentage change in the other variable.
D) an analytical technique used to show best case scenarios of demand and supply curves.
Answer:
19) The guiding function of price is
A) the movement of price to clear the market of any shortages or surpluses.
B) the use of price as a signal to guide government on the use of market subsidies.
C) a long-run function resulting in the movement of resources into or out of markets.
D) the movement of price as a result of changes in the demand for a product.
Answer:
20) If the price of a substitute product increases, which of the following is most likely to happen in the market for the product under consideration in the short run?
A) Supply will increase.
B) Firms will leave the market.
C) Firms in the market will devote more of their variable inputs to the making of this product.
D) Firms in the market will devote less of their variable inputs to the making of this product.
Answer:
21) Which of the following would lead to a short-run market surplus for fish?
A) The price of fish increases.
B) A new government study shows that fish have a greater risk of contamination from pollution.
C) An increase in the price of chicken.
D) A decrease in the number of fishing companies.
Answer:
22) Which of the following refers to a shift in the demand curve?
A) "This new advertising campaign should really increase our demand."
B) "Let's drop our price to increase our demand."
C) "We dare not raise our price because our demand will drop."
D) "If new sellers enter the market, the demand for the product is bound to increase." Answer:
23) In a perfectly competitive market, if the cost of production falls, we can expect
A) sellers to earn more profit.
B) sellers to earn less because price will fall.
C) consumers to buy more.
D) consumers to buy less.
Answer:
24) In 1998, the following event(s) caused a significant decline in the price of sugar:
A) favorable weather in important sugar growing countries.
B) economic conditions in Asia reduced sugar demand.
C) lowered demand for other products made of sugar.
D) All of the above.
Answer:
25) Which of the following will result in an increase in demand for residential housing in the short run?
A) a decrease in the price of lumber
B) an increase in the wages of carpenters
C) an increase in real household incomes
D) a decrease in the prices of residential housing Answer:
26) Which of the following can result in an increase in the supply of residential housing in the short run?
A) a decrease in the price of lumber B) a decrease in real household incomes
C) an increase in the wages of electricians D) None of the above.
Answer:
27) Which of the following is a key determinant of both supply and demand?
A) income B) future expectations
C) tastes and preferences D) sales tax Answer:
28) Which of the following could cause a long-run shift in demand as part of the "guiding function of price"?
A) a change in tastes and preferences
B) an increase in price caused by a shift in supply
C) income shift caused by an economic recession
D) an increase in number of buyers Answer:
29) A market is in equilibrium when
A) supply is equal to demand.
B) the price is adjusting upward.
C) the quantity supplied is equal to the quantity demanded.
D) tastes and preference remain constant.
Answer:
30) Which of the following indicates that there is a shortage in the market?
A) Demand is rising. B) Demand is falling.
C) Price is rising. D) Price is falling.
Answer:
31) Which of the following would cause a decreasing shift in the demand curve for a product?
A) an increase in income
B) an increase in the price of a complementary product
C) an increase in the price of a substitute product
D) the expectation that there will be a shortage in the availability of the product Answer:
32) Which of the following would cause a decrease in the price of a product?
A) an increasing shift in the supply of a product and no shift in demand
B) a decreasing shift in the supply of a product and no shift in demand
C) an increasing shift in the demand for product and no shift in supply
D) an increasing shift in the demand for product and a decreasing shift in supply Answer:
33) In the short-run if there is a surplus in the market for a product, the rationing function of price can be expected to cause
A) an increasing shift in the demand for the product.
B) a decreasing shift in the supply of the product.
C) an increase in the market price of the product.
D) a decrease in the market price of the product.
Answer:
34) In the long-run if there is a shortage in the market for a product, the guiding (allocation) function of price can be expected to cause
A) an increasing shift in the demand for the product.
B) a decreasing shift in the demand for the product.
C) an increasing shift in the supply of the product.
D) a decreasing shift in the supply of the product.
Answer:
35) The "law" of demand can be best described by
A) people will buy things that they enjoy.
B) if incomes rise, people will buy more.
C) a rise in price will cause shortages.
D) a fall in price will increase quantity demanded.
Answer:
Analytical Questions
1) For each of the following changes, show the effect on the demand curve, and state what will happen to market equilibrium price and quantity in the short run.
a. Consumers expect that the price of the good will be higher in the future.
b. The price of a substitute good rises.
c. Consumer incomes fall, and the good is normal.
d. Consumer incomes fall, and the good is inferior.
e. A medical report is published showing that this product is hazardous to your health.
f. The price of the product rises.
Answer:
a. Demand increases (now); equilibrium price and quantity increase.
b. Demand increases; equilibrium price and quantity increase.
c. Demand decreases; equilibrium price and quantity fall.
d. Demand increases; equilibrium price and quantity increase.
e. Demand decreases; equilibrium price and quantity fall.
f. This is a movement along the demand curve, and the quantity demanded will decrease.
2) For each of the following changes, show the effect on the supply curve, and state what will happen to market equilibrium price and quantity in the short run.
a. The government requires pollution control filters that raise production costs.
b. Wages of workers in this industry fall.
c. There is an improvement in technology.
d. The price of the product falls.
e. Producers expect that the price of the product will fall in the future.
Answer:
a. Supply decreases; equilibrium price rises and quantity falls.
b. Supply increases; equilibrium price falls and quantity rises.
c. Supply increases; equilibrium price falls and quantity rises.
d. This is a movement along the supply curve, and the quantity supplied will decrease.
e. Supply increases (now); equilibrium price falls and quantity rises.
3) Suppose that the demand for oranges increases. Carefully explain how the rationing function of price will restore market equilibrium.
Answer: The increase in demand causes a shortage at the original equilibrium price; the quantity supplied is less than the new quantity demanded at that price. The existence of the shortage will cause the price to rise. As price rises, the quantity supplied will increase and the quantity demanded will decrease (along the new demand curve) until equilibrium is reached at a higher price (and quantity).
4) Suppose that the demand for oranges increase. Explain the long -run effects of the guiding function of price in this scenario.
Answer: n the long run, the higher price of oranges will signal more firms to enter the orange market, as it will seem more profitable than some other markets. As firms enter, supply increases, causing the price to fall relative to the short-run price and quantity to increase further. The higher short-run price has guided more resources into the market.
5) Suppose that macroeconomic forecasters predict that the economy will be expanding in the near future. How might managers use this information?
Answer: conomic expansion increases consumer incomes, which will increase the demand for normal goods and decrease the demand for inferior goods. Thus a producer of normal goods might be anticipating a future increase in demand and thus considering expansion, while a producer of inferior goods might be preparing for a decrease in demand and considering contraction or a movement into a different product line.
6) For each of the following sets of supply and demand curves, calculate equilibrium price and quantity.
a. QD = 2000 - 2P; QS = 2P b. QD = 500 - P; QS = 50 + P
c. QD = 5000 - 10P; QS = -1000 + 5P
Answer:
a. Q = 1000, P = 500 b. Q = 275, P = 225 c. Q = 1000, P= 400
7) Annual demand and supply for the Entronics company is given by:
QD = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5000 + 100P
where Q is the quantity per year, P is price, I is income per household, and A is advertising expenditure.
a. If A = $10,000 and I = $25,000, what is the demand curve?
b. Given the demand curve in part a., what is equilibrium price and quantity?
c. If consumer incomes increase to $30,000, what will be the impact on equilibrium price and quantity?
Answer:
a. QD = 19,500 - 100P
b. P = $122.50, Q =7,250
c. The new demand curve is: QD = 22,000 - 100P
Thus the new equilibrium price is $135, and the new quantity is 8,500.
8) The market for milk is in equilibrium. Recent health reports indicate that calcium is absorbed better in natural forms such as milk, and at the same time, the cost of milking equipment rises. Carefully analyze the probable effects on the market.
Answer: The heath reports are likely to cause an increase in the demand for milk. Alone, this would increase both the equilibrium price and quantity of milk. The increase in equipment costs will cause a decrease in the supply of milk, and this alone would cause an increase in equilibrium price and a decrease in equilibrium quantity. Taken together, both effects will lead to an increase in price, and thus we can be certain that the equilibrium price will rise. The effect on quantity is unclear as the supply and demand shifts move quantity in different directions.
9) Industry supply and demand are given by: QD = 1000 - 2P and QS = 3P
a. What is the equilibrium price and quantity?
b. At a price of $100, will there be a shortage or a surplus, and how large will it be?
c. At a price of $300, will there be a shortage or a surplus, and how large will it be?
Answer:
a. P = $200, Q = 600.
b. At a price of $100, there will be a shortage. The quantity demanded will be 800, and the quantity supplied will be 300, and thus there will be a shortage of 500 units.
c. At a price of $300, there will be a surplus. The quantity demanded will be 400, and the quantity supplied will be 900, and thus there will be a surplus of 600 units.
10) A product's Demand Curve is: Qd = 50 - 2P, and its Supply Curve is: Qs = 40 + P.
a. When P = $10, what is the difference, if any, between Qd and Qs?
b. When P = $2, what is the difference, if any, between Qd and Qs?
c. What are the equilibrium values of P and Q?
Answer:
a. Qd = 30 and Qs = 50
b. Qd = 46 and Qs = 42
c. Q = 43.33 and P = $3.33
11) A product's Demand Curve is: Qd = 25 - P, and its Supply Curve is: Qs = 10 + 2P.
a. When P = $20, what is the difference, if any, between Qd and Qs?
b. When P = $3, what is the difference, if any, between Qd and Qs?
c. What are the equilibrium values of P and Q?
Answer:
a. Qd = 5 and Qs = 50
b. Qd = 22 and Qs = 16
c. Q = 20 and P = $5
12) List the major nonprice determinants of demand.
Answer: onsumer preferences (tastes), income, prices of related products (complements and substitutes), future expectations, and number of buyers.
13) List the major nonprice determinants of supply.
Answer: nput costs, technology, prices of other products that can be sold by the firm (complements and substitutes), future expectations, weather conditions, and number of sellers.
Chapter 4 Demand Elasticity (Appendix 4A)
Multiple-Choice Questions
1) The sensitivity of the change in quantity demanded to a change in price is called
A) income elasticity. B) cross-elasticity.
C) price elasticity of demand. D) coefficient of elasticity.
Answer:
2) The sensitivity of the change in quantity consumed of one product to a change in the price of a related product is called
A) cross-elasticity. B) substitute elasticity.
C) complementary elasticity. D) price elasticity of demand.
Answer:
3) The minimum wage is an example of a government imposed
A) price control.
B) price ceiling.
C) price floor.
D) Both A and B.
E) Both A and C. Answer:
4) A product that is similar to another, and can be consumed in place of it, is called
A) a normal good. B) an inferior good.
C) a complementary good. D) a substitute good.
Answer:
5) Two goods areif the quantity consumed of one increases when the price of the other decreases.
A) normal B) superior
C) complementary D) substitute Answer:
6) A tax that is imposed as a specific amount per unit of a product is a(n)
A) excise or specific tax. B) sales or ad valorem tax.
C) compound duty. D) income tax.
Answer:
7) The government unit that wants to achieve "revenue enhancement" will find it considerably more favorable to enact an excise tax on products whose demand is
A) highly elastic. B) relatively elastic.
C) highly inelastic. D) unitary elastic.
Answer:
8) A product consumed in conjunction with another is called a(n)
A) inferior good. B) complementary good.
C) normal good. D) substitute good.
Answer:
9) Two products areif the quantity consumed of one increases when the price of the other increases.
A) normal B) inferior
C) complementary D) substitutes Answer:
10) When total revenue increases from $18,000 to $26,000 when quantity increases from eight to ten, marginal revenue is equal to
A) $3,000. B) $4,000. C) $8,000. D) $2,600.
Answer:
11) When total revenue reaches its peak (elasticity equals 1), marginal revenue reaches
A) 1.
B) zero. C) -1.
D) Cannot be determined from the information provided.
Answer:
12) The demand for items that go into the production of a final product is called
A) marginal demand. B) aggregate demand.
C) partial demand. D) derived demand.
Answer:
13) Remembering that demand elasticity is defined as the percentage change in quantity divided by the percentage change in price, if price decreases and, in percentage terms, quantity rises more than price has dropped, total revenue will
A) increase. B) decrease.
C) remain the same. D) either increase or decrease.
Answer:
14) When a one percent change in price results in a one percent change in quantity demanded in the opposite direction, demand is
A) relatively inelastic. B) unitary elastic.
C) perfectly elastic. D) perfectly inelastic.
Answer:
15) The owner of a produce store found that when the price of a head of lettuce was raised from 50 cents to $1, the quantity sold per hour fell from 18 to 8. The arc elasticity of demand for lettuce is
A) -0.56. B) -1.15. C) -0.8. D) -1.57.
Answer:
16) When purchases of tennis socks decline following an increase in the price of tennis sneakers (other things remaining equal), the relationship between these two items can be described as
A) substitutable. B) complementary.
C) unique. D) ordinary.
Answer:
17) If the income elasticity coefficient equals 1, the proportion of a consumer's income spent on a given product after a change in income will be _the proportion of income spent on that product prior to the income change.
A) greater than B) less than
C) equal to D) either greater than or equal to Answer:
18) In general, if there are many good substitutes for a given product, the demand elasticity will be
A) high. B) low. C) indeterminate. D) zero.
Answer:
19) The derived demand curve for a product component will be more inelastic
A) the larger is the fraction of total cost going to this component.
B) the more inelastic is the demand curve for the final product.
C) the more elastic are the supply curves of cooperating factors.
D) the less essential is the component in question.
Answer:
20) As income rise and consumers feel "better off," they will shift consumption away from
goods toward goods more commensurate with their improved economic status.
A) inferior B) superior C) normal D) inelastic Answer:
21) If the consumption of sugar does not change at all following a price increase from 49 cents per pound to 58 cents per pound, the demand for sugar is considered to be
A) relatively inelastic. B) perfectly elastic.
C) perfectly inelastic. D) unitary elastic.
Answer:
22) When the consumption of chicken (whose price has not changed) increases following an increase in the price of beef, the two products can be considered to be
A) complements. B) substitutes. C) unrelated. D) correlated.
Answer:
23) If the income elasticity of a particular product is -0.2, it would be considered
A) a superior good. B) a normal good.
C) an inferior good. D) an elastic good.
Answer:
24) If a firm decreases the price of a product and total revenue decreases, then
A) the demand for this product is price elastic.
B) the demand for this product is price inelastic.
C) the cross elasticity is negative.
D) the income elasticity is less than 1.
Answer:
25) If the price of a product is increased and total revenue received from the sale of this product increases, then the price elasticity of demand for the product is
A) elastic.
B) inelastic.
C) unitary.
D) None of the above.
Answer:
26) If there is an increase in consumer income and the demand for a product declines, then the product is
A) a luxury good. B) a necessity good.
C) a normal good. D) an inferior good.
Answer:
27) If the price of Product A increases and this results in a decrease in the demand for Product B, then Products A and B are
A) complements. B) substitutes. C) inferior. D) normal.
Answer:
28) If the price of a product is decreased and total revenue received from the sale of this product does not change, then the price elasticity of demand for the product is
A) elastic. B) inelastic. C) unitary. D) None of the above.
Answer:
29) If the demand for a product is price inelastic and the product price is increased, then the marginal revenue (MR) received by the seller will
A) not change.
B) decrease.
C) increase.
D) Can't be determined from this information.
Answer:
30) If the price elasticity of supply of a product is elastic and the product price increases, then the increase in the product supply should be
A) greater than the increase in price.
B) less than the increase in price.
C) the same as the increase in price.
D) Can't be determined from this information.
Answer:
31) Which of the following is not a determinant of price elasticity of demand?
A) product durability B) technology
C) ease of substitution D) proportion of total expenditures Answer:
32) If government imposes a price ceiling on a product that is below the market equilibrium price, then
A) a surplus will develop.
B) a shortage will develop.
C) producers will reduce their sales price.
D) consumers will reduce their demand for the product.
Answer:
33) If government imposes a price floor on a product that is above the market equilibrium price, then
A) a surplus will develop.
B) a shortage will develop.
C) producers will increase their sales price.
D) consumers will increase their demand for the product.
Answer:
34) If government imposes an excise tax on a product and the tax burden is borne equally by buyers and sellers, then
A) price elasticity of demand is unitary.
B) price elasticity of supply is unitary.
C) the absolute values of price elasticities of demand and supply are equal.
D) None of the above.
Answer:
Analytical Questions
1) The initial price of a cup of coffee is $1, and at that price, 400 cups are demanded. If the price falls to $0.90, the quantity demanded will increase to 500.
a. Calculate the (arc) price elasticity of demand for coffee.
b. Based on your answer, is the demand for coffee elastic or inelastic?
c. Based on your answer to a., if the price of coffee is increased by 10%, what will happen to the revenues from coffee? Carefully explain how you know.
Answer:
a. Arc elasticity = -2.11
b. Elastic
c. Revenues will fall. Demand is elastic, and thus a 1% increase in price will lead to a greater percentage decrease in quantity demanded. Revenues fall because the price increase does not make up for the reduction in sales.
2) The demand curve is: QD = 500 - 1/2 P.
a. Calculate the (point) price elasticity of demand when price is $100. Is demand elastic or inelastic?
b. Calculate the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic?
c. Find the point at which point elasticity is equal to -1.
Answer:
a. Elasticity = -1/2 (100/450) = -0.11, and is inelastic.
b. Elasticity = -1/2(700/150) = -2.5, and is elastic.
c. Elasticity is -1 at the midpoint of the demand curve, which is at a price of $500 and a quantity of 250.
3) Suppose that the price elasticity of demand for wheat is known to be -0.75. Will a good wheat crop (which increases the supply of wheat) be likely to increase or decrease the revenues of farmers? Carefully explain.
Answer: good wheat crop that increases the supply of wheat will cause the equilibrium price
wheat to decrease (and quantity to increase). Since demand is inelastic, total revenues will fall, as the percentage change in quantity will be less than the percentage change in price.
4) The income elasticity for most staple foods, such as wheat, is known to be between zero and one.
a. As incomes rise over time, what will happen to the demand for wheat?
b. What will happen to the quantity of wheat purchased by consumers?
c. What will happen to the percentage of their budgets that consumers spend on wheat?
d. All other things equal, are farmers likely to be relatively better off or relatively worse off in periods of rising incomes?
Answer:
a. Demand will increase, since wheat has a positive income elasticity.
b. The quantity of wheat purchased will increase.
c. The percentage of consumer budgets spent on wheat and other staple goods will fall, since the percentage change in the demand for wheat will be less than the percentage change in income.
d. Farmers are likely to be relatively worse off, since the demand for what they are selling will be rising less rapidly than the demand for other goods that they are likely to purchase.
5) The demand for salt is relatively price inelastic, while the demand for pretzels is relatively price elastic. How can you best explain why?
Answer: Salt has few substitutes, and takes up a small percentage of the consumer's budget, and thus demand is likely to be inelastic. While pretzels are also a small part of the budget, there are many substitutes available.
6) Unions have generally bee far more successful in organizing and raising wages in skilled trades such as carpentry than in unskilled trades. Use the laws of derived demand to explain why.
Answer: There are at least two reasons. One is that the elasticity of substitution between skilled workers and other factors of production is low; thus firms cannot substitute some other factor of production if wages rise. Secondly, skilled labor is likely to be a relatively small percentage of total costs, and thus raising wages does not cause a large increase in total costs (which would lead to a reduction in supply, an increase in price, and a decrease in output). Unskilled labor has more substitutes and is likely to be a larger share of costs for firms that employ it, and thus if unions raise wages, firms employ other factors of production, and many workers will be laid off.
7) Governments impose excise taxes on goods that have inelastic demand, such as cigarettes, more often than in other cases. Why?
Answer: mposing an excise tax reduces the supply of the good, reducing equilibrium quantity and raising the price. If demand is elastic, taxes will tend to reduce quantity by a significant amount, and thus government tax revenues will be relatively small. However, if demand is inelastic, the reduction in quantity will be small, and government tax revenues will be higher. (Governments may also impose taxes to deter consumption, but this is likely to be ineffective if elasticity is low.)
8) Demand and supply in the wheat market are given by:
QD = 2000 - 1000 P and QS = -500 + 1000 P,
where Q is millions of bushels and P is price per bushel.
a. Find the equilibrium price and quantity.
b. Suppose that the government wishes to support farm income and thus sets a price floor of
$1.50/bushel. Find the size of the farm surplus.
c. What is the cost of this program to the government?
Answer:
a. P = $1.25, Q = 750
b. If P = $1.50, QD = 500 and QS = 1000. The surplus is 500 (million) bushels. c. $1.50□500 = $750 million.
9) Demand is given by: QD = 6000 - 50P, Domestic supply is: QS = 25P, and Foreign producers can supply any quantity at a price of $40.
a. If foreign producers can sell in the domestic market, what is the equilibrium price? What is the equilibrium quantity? How much is sold by domestic and foreign producers, respectively?
b. Under domestic government pressure, foreign producers voluntarily agree to restrict their goods. What will happen to the price and quantity? What will happen to the amount that domestic producers supply? What will happen to revenues of domestic and foreign producers?
Answer:
a. P = $40. Q = 4,0000. Of that, domestic producers supply 1,000 units, and foreign producers supply 3,000 units.
b. The quantity restriction will cause equilibrium price to rise and quantity to decrease. Domestic producers will sell more, and foreign producers will sell less. Revenues of domestic producers will rise. The effect on the revenues of foreign producers is unclear; if demand is inelastic, they may rise.
10) You are told that the price elasticity of demand for widgets is -0.75, the income elasticity of widgets is 2, and the cross-price elasticity of widgets and gadgets is 4. Carefully explain what information you can gather from each of these figures.
Answer: mand for this good is inelastic with respect to price. This is a normal good as income elasticity is greater than zero, and it is a luxury/superior good as income elasticity is greater than one. Widgets and gadgets are substitutes, and they are good substitutes because cross-price elasticity is elastic (large).
11) If a product's demand function is: Q = 30 - 3P, then calculate the price elasticity of demand when
a. product price is $3 using the point elasticity formula
b. product price is $4 using the point elasticity formula
c. product price decreases from $4 to $3, using the arc elasticity formula
d. product price is $5, using the point elasticity formula
e. product price increases from $4 to $5, using the arc elasticity formula Answer: (a) -0.429 (b) -0.667 (c) -0.538 (d) -1.000 (e) -0.818
12) If a price of corn is $3.00 a bushel, 5,000 bushels would be demanded. If the price rises to
$4.00
a bushel, 4,000 bushels would be demanded.
a. What is the (arc) price elasticity of demand?
b. Based on this answer if the price of corn rose to $5.00 a bushel, what would be the demand for corn?
c. If the price of corn decreased from $4.00 to $3.00 a bushel, what would be the change in total revenue for sellers of corn?
d. If the price of corn increased from $4.00 to $5.00 a bushel, what would be the change in total revenue for sellers of corn?
Answer: (a) -0.778 (b) 3,309 (c) -$1,000 (d) +$545
13) Domestic demand for a product is: Qd = 3000 - 25P, the domestic supply of the product is: Qs = 20P, and foreign producers can supply any quantity at a price (P) of $30.
a. What is the domestic equilibrium price and quantity?
b. At this domestic equilibrium price, how much of the product will be supplied by domestic producers and how much by foreign producers?
Answer:
a. P = $30 and Q = 2250
b. Domestic producers supply 600 units and foreign producers supply 1650 units.
Chapter 5 Demand Estimation and Forecasting
Multiple-Choice Questions
1) If a regression coefficient passes the t-test, it means that
A) the regression equation is valid.
B) the regression coefficient is significantly different from zero.
C) the regression coefficient can be used for forecasting.
D) the regression coefficient should be included in the regression equation.
Answer:
2) Which of the following is a test of the statistical significance of the entire regression equation?
A) t-test B) R2 C) F-test D) Durbin-Watson test Answer:
3) Which of the following is a test of the statistical significance of a particular regression coefficient?
A) t-test B) R2 C) F-test D) Durbin-Watson test Answer:
4) Which of the following is a measure of the explanatory power of the regression model?
A) t-test B) R2 C) F-test D) Durbin-Watson test Answer:
5) When a regression coefficient is significant at the .05 level, it means that
A) there is only a five percent chance that there will be an error in a forecast.
B) there is 95 percent chance that the regression coefficient is the true population coefficient.
C) there is a five percent chance or less that the estimated coefficient is zero.
D) there is a five percent chance or less that the regression coefficient is not the true population coefficient.
Answer:
Answer the following question(s) based on the following regression equation. (Standard errors in parentheses,n = 150.):
QD = 1000 - 50PA + 10PB + .05I, (20) (7) (.04)
where QD = quantity demanded of product A, PA = price of product A, PB = price of a competing product B and I = per capita income.
6) Using the "rule of 2," which of the following variables can be deemed statistically significant?
A) PA
B) PB
C) I
D) All of the above.
E) None of the above.
Answer:
7) For which of the following variables should a "two tail" t-test be applied?
A) P B) I C) PC D) Should be applied for all.
Answer:
8) Which of the following refers to a relatively high correlation among the independent variables of a regression equation?
A) autocorrelation
B) the identity problem
C) statistically insignificant regression coefficients
D) multicollinearity Answer:
9) When the R2 of a regression equation is very high, it indicates that
A) all the coefficients are statistically significant.
B) the intercept term has no economic meaning.
C) a high proportion of the variation in the independent variable can be accounted for by the variation in the independent variables.
D) there is a good chance of serial correlation and so the equation must be discarded.
Answer:
10) The coefficient of a linear regression equation indicates
A) the change in the dependent variable relative to a unit change in the independent variable.
B) the change in the independent variable relative to a unit change in the dependent
variable.
C) the percentage change in the dependent variable relative to a unit change in the independent variable.
D) the percentage change in the independent variable relative to a unit change in the dependent variable.
Answer:
11) For the regression equation Q = 100 - 10X1 + 25X2, which of the foll
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****** ***************** ************* *********** * ** a stock is expected ** *** an ****** ******** ** *** forever **** ** the approximate ******* value of the ***** ***** **** the ******** **** is **** ** * ***** ** expected ** pay an ****** ******** ** $20 ******* **** ** *** approximate ******* ***** of *** ***** given **** *** ******** **** ** **** ** * ***** ** expected ** *** ** ****** dividend ** *** **** **** what ** *** *********** ******* ***** ** *** stock ***** **** *** discount **** ** ** *** ********* are expected ** **** at * rate of 2% *** *************** P * D/k * ***** = $400 b P * ***** = ***** * * D1/(k * ** * ****** * 02) * $33333 2) ** * stock ** expected to pay * ******** ** *** *** *** current year **** ** the *********** ******* ***** of **** ***** ***** ** ******** rate ** ** *** a ******** ****** rate of ************ P * ******** * **** * ******* = *********** ******** the difference ******* *** ******** ***** Added ***** and *** ****** ***** ***** (MVA) ******** ** determining stockholder wealth Answer: EVA ** *** ********** between * firm's ****** ** ***** ******* *** its cost ** ******* ***** *** ** *** ********** ******* *** market ***** ******* **** ***** of * **** ****** ****** ** ******* ********* **** **** **** *** **************** 3 Supply *** ****** ********* 3A)Multiple-Choice Questions1) *** **** is the *********** **** ****** ** the economic ******** of *** *********** three ****** or *** ******** ********* ***** time ** which ******* ******* ** the ****** respond to changes ** ****** *** equilibrium priceC) ***** ****** of **** ** takes new ******* ** ***** the marketD) ***** amount ** **** it takes ******** ******* ** ***** *** market ******* B2) * new *********** ******* that ** ******* in **** *** cost ** *** *** ***** *** ********** **** ****** vendors ** ***** ******* tacos What short-run ****** ** *** think **** ***** **** ** the market *** hot ********* ******** ** the ****** *** *** **** ** ******** ** *** demand *** *** ****** ******** ** the ****** of *** **** ** ******** in *** supply ** *** dogs ******* *** Which ** *** ********* ** *** * nonprice *********** ** *********** tastes *** *********** B) ******** ********** D) future ************ ******* C4) ***** ** *** ********* ** not * nonprice determinant of ********* ***** B) ************ ****** ** ****** ************ ******* C5) ***** ** the ********* ********** ** *** ******* An increase in demand ****** *********** ***** *** ******** ** ****** A decrease ** ****** ****** equilibrium ***** *** quantity ** ****** ** increase in supply ****** *********** ***** ** **** *** ******** ** ****** * decrease ** ****** ****** equilibrium ***** ** **** *** quantity ** rise Answer: ***** A ********* **** ****** ****** *** ****** ** time ** ***** sellers ******* ** the ****** ******* ** * ****** ** equilibrium ***** ** ********* *** ****** ** ***** fixed ******** *** ****** ** **** it ***** for *** ****** ***** ** ***** * new *********** ** * ****** ** **** initial ****** ** ****** or ******** the ****** ** **** ** ***** *** sellers *** ****** ** ****** ** ******* to enter * new ******** *** ****** ** time ** ***** *** ****** ** change their ********** ****** ** * ****** of * change ** ****** ************** ***** ***** ** *** ********* ***** ***** * ******** in *** ****** for ********* *** ***** ** *** **** ********* B) *** ***** ** fish *********** The ***** ** ******* ********* ** *** ****** ** fishing boats decreases Answer: ***** ***** ** the following ***** ***** * short□run ******** ** the ******** ******** of ******** ************** The price ** ************ *********** *** price ** PC software *********** *** ****** of ** ************* *********** The **** ** ************* PCs decreases Answer: ***** Which ** *** ********* will *** ***** * ********* ***** in *** ****** curve? A) a ****** ** *** ****** ** ******* ** * ****** in the **** ** *********** * ****** ** *** price ** *** ******* D) a ****** ** ****** expectations ******* C10) ** *** ***** run * ****** in *** equilibrium price will A) ****** **** ** *********** ***** * ***** ** *** demand ******* ***** a shift ** *** ****** ******* cause * ****** ** *** ******** ******** ** supplied Answer: ****** Which ** *** ********* ******* most generally ** ****** in *** long run? A) ******* cost **** declineB) ******* are **** ** **** *********** ** all of ***** factors ** productionC) ******* are **** **** ** make *********** ** their ******** ******* of ************ *** original ******* will leave the *************** B 12) * movement ***** *** demand ***** *** ** ****** by A) * ****** ** ******** ************ ** demandB) * ****** ** consumer ************** a change ** ******** a change ** supply Answer: ****** *** rationing ******** ** ********* ****** **** ***** ** * ******** ** resources **** ** *** ** ******* as * ****** of ******* ** *** *********** ****** ******* ** **** ***** as *** ******* ******** ** ******* ****** when ********* change their ****** and ************* ****** **** when *** market *********** ****** ****************** ****** *** ****** ** *** *** ** **** **** ***** in **** ****** was prompted ** ***** part by *** ********** ***** price ******** * *********** market **** ****** ***** **** ****** **** ** *** equilibrium ***** *** ****** *** **** drinks? A) ***** ***** ****** ***** B) ***** ***** output ******* ***** rises ****** ***** ** ***** ***** ****** ************** ****** ***** of *** ********* best ********* *** ******** ********* ** price?A) ** response to *** surplus or ******** in two markets ***** ****** as a ******** ********* ** ********** in *** ****** *** ********** ** the other market ** the ***** ***** *** guiding function of ***** is the ******** ** ********* **** ** out of ******* ** response to a ****** ** the *********** ***** ** * **** ** ********* *** ******* function ** ***** ****** **** *** ****** ***** changes ** ********* *** ********* ******* ****** and ****** ****** ** * shortage ** surplus ** *** original priceD) The ******* ******** ******* ****** ** *** ***** run ***** the ********* function ******* ****** in *** **** ************ B 16) Which ** *** ********* best applies ** *** *********** between *** ***** **** *** *** ****** ********* The ***** *** ** * ****** ** approximately *** ****** ***** *** long run ** any **** ***** ******** ** *** short run **** new firms *** ***** while ** the long□run ***** *** ****** ***** ** **** the ******** *** ********* ******** ** ***** ** a short□run ********** ******* the ******* ******** ** * long-run ************ *** ** *** ***** ********** are correct Answer: ****** Which ** the ********* ***** ******** that ***** ** *********** below its ****** **************** ***** *** a number of ********* *** *** **** **** unwanted ************* ***** are a ****** ** customers who **** ** ****** on ******* ***** *** the ********* ***** decide ** leave *** marketD) *** ********** **** **** in *** subsidize *** **************** ****** Comparative ******* ******** ** ********* ** **** illustrated asA) *** ********** of equilibrium points before and ***** changes ** *** ****** have ********** a comparison ** *** ***** ** marketsC) *** comparison ** *** ********** ** ****** in *** *** ******** ******* ** the percentage ****** in *** ***** ********** ** analytical ********* **** ** **** best case ********* of ****** and ****** *************** ****** The ******* ******** ** price ****** *** ******** ** ***** to ***** the ****** of *** ********* ** *********** *** *** ** ***** as * ****** ** guide ********** ** *** use ** market *********** * ******** function ********* ** *** ******** ** resources into or *** ** marketsD) the ******** ** price ** * ****** ** ******* in *** ****** *** * **************** ****** ** *** ***** of * substitute product ********* ***** ** *** ********* ** **** likely ** ****** ** *** market *** the product ***** ************* ** *** ***** ****** ****** will ********** Firms **** leave the marketC) Firms ** the ****** **** ****** **** ** ***** ******** ****** to *** ****** of **** ********* Firms ** *** ****** **** ****** less ** their ******** ****** ** *** making ** **** product Answer: ****** ***** ** *** ********* would **** to a short-run ****** ******* *** fish? A) *** price ** fish *********** A new government study shows that fish **** a ******* risk ** contamination **** *********** ** ******** ** *** ***** ** ********* * decrease ** *** ****** of ******* ****************** ****** ***** ** the ********* ****** to * shift ** *** demand ********** "This *** advertising campaign ****** ****** ******** *** ********* ****** **** *** ***** ** ******** our ********* *** dare *** ***** *** ***** ******* *** ****** will ******* *** new ******* enter *** ****** *** ****** *** the product is ***** ** increase" Answer: **** ** * ********* *********** market ** *** **** ** ********** ***** ** *** ********** ******* to **** **** profitB) sellers ** earn **** because price **** fallC) consumers ** *** ****** ********* ** *** ************* ****** ** 1998 *** ********* ******** ****** * *********** ******* ** *** price ** ********** favorable weather ** important ***** ******* *********** ******** ********** ** Asia reduced ***** ******** lowered ****** *** ***** products **** ** ******* All ** *** ************** ****** ***** of *** following will ****** ** an increase ** ****** *** *********** ******* in *** ***** run? A) a decrease ** *** price ** lumberB) ** ******** ** *** ***** ** carpentersC) ** increase ** **** ********* incomesD) * ******** ** the ****** of *********** housing Answer: **** Which ** *** ********* *** ****** in an increase ** the supply ** residential housing in the short run? A) * decrease ** *** ***** of lumber B) a ******** ** **** ********* ********* ** ******** ** *** wages of ************ ** **** ** *** above Answer: ****** Which of the ********* is * key *********** of both ****** *** *********** ****** ** ****** ************** ****** *** *********** ** ***** *** ******* B28) ***** of *** ********* ***** ***** * ******** ***** ** demand ** **** ** *** "guiding ******** ** *********** * ****** ** ****** *** ************* ** ******** in ***** ****** ** * ***** in ******** ****** shift caused ** an ******** *********** ** increase ** ****** ** ****** ******* ****** * ****** ** ** equilibrium ******** ****** is ***** ** demandB) *** price ** ********* ******** the ******** ******** ** ***** ** the ******** demandedD) ****** *** preference remain constant Answer: ****** ***** ** the ********* ********* that ***** is a ******** ** *** ************* ****** ** ****** ** Demand ** ********* ***** ** rising ** Price ** **************** C 31) ***** of the ********* ***** ***** * decreasing ***** ** *** demand ***** *** a product? A) an increase ** ******** ** ******** ** *** ***** ** * ************* ********* an ******** ** the ***** ** a substitute ********* *** *********** that ***** **** be * shortage ** *** availability of *** product ******* B32) ***** of the ********* would cause * ******** ** the ***** ** * product? A) ** increasing shift ** the ****** ** a product *** no shift ** ******** * ********** ***** ** *** supply of * ******* *** ** ***** in ******** ** ********** ***** ** *** ****** *** ******* and ** ***** ** supplyD) an ********** ***** in *** ****** *** ******* *** a ********** ***** in ****** ******* **** ** *** ********* if ***** ** * surplus in the ****** *** a product *** rationing ******** ** price can ** ******** ** ********* an ********** ***** ** *** ****** *** *** ********* * ********** ***** ** the ****** ** *** ********* ** ******** ** the ****** ***** of the ********* * ******** ** *** ****** ***** ** *** **************** ****** In *** ******** ** ***** ** * ******** ** *** market *** a ******* *** ******* (allocation) ******** of ***** *** be expected ** ********* ** ********** shift ** *** demand *** *** ********* * ********** ***** ** the demand for *** ********* ** ********** ***** ** *** ****** ** *** productD) * ********** ***** ** the supply ** the product Answer: C 35) The ***** ** ****** *** ** **** ********* ****** ****** will buy ****** **** **** ******* ** incomes rise people will *** ****** a **** in price **** ***** *********** a fall ** ***** **** ******** ******** ***************** ************* *********** For **** of *** ********* ******* show *** effect ** the demand ***** and state what **** ****** to market *********** ***** and ******** in the ***** **** Consumers ****** **** *** ***** ** *** **** **** ** ****** in *** ******* *** price ** * ********** **** ****** ******** ******* **** *** *** **** is ******* Consumer incomes **** *** the **** ** inferiore * ******* ****** ** ********* ******* **** **** ******* ** ********* to **** healthf *** price of the ******* *************** ****** increases (now); *********** price and quantity ********* ****** ********** *********** ***** and ******** ********* ****** ********** *********** ***** and ******** falld ****** increases; *********** ***** *** quantity ********* Demand ********** equilibrium ***** *** ******** fallf **** ** * ******** ***** the demand ***** *** the ******** demanded **** ************ *** **** of *** following changes **** *** ****** ** *** ****** ***** and ***** **** **** ****** ** ****** equilibrium ***** *** quantity in *** ***** runa The ********** ******** ********* ******* filters that ***** ********** ****** ***** of ******* in **** ******** ***** ***** ** ** *********** ** *********** The price of the ******* ****** Producers ****** **** *** ***** of *** ******* **** **** in *** future Answer:a Supply ********** *********** ***** ***** *** ******** ****** ****** ********** *********** price ***** *** quantity ****** ****** ********** equilibrium ***** ***** and ******** ****** **** ** * ******** along *** ****** ***** *** the quantity ******** **** ********* ****** ********* (now); equilibrium ***** ***** and ******** ********* ******* **** the demand *** ******* ********* Carefully ******* *** *** ********* ******** ** price **** ******* ****** equilibrium Answer: The ******** ** demand ****** a ******** ** the ******** *********** price; *** ******** ******** ** **** **** *** *** ******** ******** ** **** price The ********* ** *** ******** **** ***** *** ***** to **** As ***** ***** *** ******** ******** **** ******** *** *** ******** ******** **** decrease (along *** *** ****** ****** ***** *********** ** reached at * ****** ***** **** ************* ******* **** the demand for ******* ******** ******* *** **** -run ******* ** *** ******* ******** of ***** ** **** scenario Answer: ** *** **** *** the higher price of ******* will ****** **** firms ** ***** *** orange ****** as ** **** **** **** ********** than **** other markets ** ***** ***** ****** ********* causing *** price ** **** ******** ** *** ********* price and quantity ** increase further The ****** ********* price has ****** more resources **** the ********** ******* that macroeconomic forecasters ******* that *** ******* **** ** ********* in *** **** ****** How ***** ******** use this information? Answer: ******** ********* increases ******** ******* ***** **** ******** *** ****** *** ****** ***** and decrease the demand for ******** ***** **** * producer ** ****** goods ***** be anticipating a future increase ** ****** *** **** *********** ********* ***** a producer ** inferior ***** ***** ** preparing *** * decrease ** ****** *** *********** contraction ** * ******** **** * ********* ******* line 6) *** **** of *** ********* **** of supply and demand curves ********* equilibrium ***** *** ********* QD * 2000 * *** ** = ** * ** * *** * ** ** = ** * ** ** = **** - **** ** = ***** * ************ * = 1000 * * *** * * = *** * = *** * * * **** P= ******* Annual demand and ****** for the ********* ******* ** given ***** * **** * ** * * ** A - **** *** ** * ***** * ********* * ** the ******** per year * ** ***** * ** income *** household *** * is *********** ************ If * * ****** and * * ****** **** ** *** ****** ******* ***** the ****** ***** in part * **** ** equilibrium ***** *** ********** ** ******** ******* ******** ** ****** **** will ** *** ****** ** *********** price *** ******************* QD * 19500 * ***** P * ****** Q =7250c *** new ****** ***** *** ** * ***** * ******** the *** *********** ***** is **** *** *** *** ******** ** ******** The ****** *** **** is in *********** Recent ****** ******* ******** **** ******* ** absorbed better ** natural ***** such ** milk and ** *** **** **** the cost ** ******* ********* ***** ********* ******* *** ******** ******* ** *** *************** *** ***** ******* are ****** to ***** ** ******** ** *** ****** for **** ***** **** ***** increase **** *** equilibrium ***** *** quantity of milk *** ******** in ********* ***** will ***** * ******** ** *** ****** ** **** *** **** ***** ***** cause ** increase ** equilibrium ***** *** * decrease ** *********** ******** ***** ******** both ******* **** lead to ** ******** ** price *** thus we *** ** ******* **** the *********** ***** **** **** *** ****** ** ******** ** ******* ** *** ****** *** ****** ****** **** ******** ** ********* ************** ******** ****** and ****** are ***** by: ** * **** * ** and QS * *** **** ** *** *********** price *** quantity?b ** * price of $100 **** ***** be * ******** ** a surplus *** *** large **** it be?c ** * ***** of **** **** there be a ******** ** a surplus *** *** ***** **** ** ************* P * $200 Q * **** ** * ***** of **** there will be * ******** *** quantity demanded will be *** *** *** ******** supplied **** be 300 and **** ***** will be * ******** ** 500 unitsc ** * price ** $300 there will ** * surplus *** ******** demanded will be *** and *** ******** supplied will ** *** and thus ***** **** ** * surplus ** *** ************ A ********* Demand ***** *** Qd * 50 * ** *** its ****** ***** is: ** * 40 * ** **** * * *** **** ** *** difference if *** ******* Qd and **** **** P = $2 **** is *** difference if *** ******* ** *** **** **** are the *********** ****** of * *** ************ ** * 30 *** Qs * *** ** = ** *** ** * *** * * **** *** P = ********* * ********* Demand ***** is: Qd * ** * P *** *** Supply Curve *** ** * ** * 2Pa **** P * $20 **** ** *** difference ** *** ******* ** *** **** **** * * $3 **** ** the difference ** *** ******* ** and Qs?c **** are *** *********** values ** * and ************ ** = * and ** = *** ** * ** *** ** = *** * * ** *** * * ******* List *** ***** ******** ************ of demand Answer: ******** *********** ******** income prices of related products ************ and ************ ****** ************ *** ****** of *********** **** *** ***** ******** ************ ** supply Answer: ***** ***** ********** ****** ** other ******** **** can ** **** ** *** firm (complements and ************ ****** ************ ******* ********** *** ****** ** **************** * ****** ********** (Appendix 4A) Multiple-Choice *********** *** *********** ** *** ****** ** ******** demanded ** * ****** ** ***** is called A) ****** ********** ** cross-elasticityC) ***** ********** ** ****** D) coefficient of elasticity Answer: ***** *** sensitivity ** the ****** ** ******** consumed of *** ******* ** * ****** ** *** price ** * ******* product is ********** cross-elasticity B) substitute ************ ************* elasticity D) price ********** ** *************** ***** The ******* wage is ** example of * ********** imposed A) ***** ********* price ceilingC) price ******* **** * *** *** Both * *** C ******* *** * ******* **** ** ******* to ******* and *** ** ******** in ***** of ** is ********** * ****** **** B) an ******** ****** a complementary good ** a ********** ************* ***** *** ***** *** if *** ******** ******** ** *** ********* when the price of the other ************* ****** ** superiorC) complementary D) substitute Answer: C 6) * tax that ** ******* ** * ******** ****** per unit ** * ******* ** ******** ****** ** ******** *** B) ***** ** ** ******* ***** compound **** ** income ************ ***** *** government **** **** ***** to ******* "revenue ************ will **** ** considerably **** ********* ** ***** ** ****** tax ** ******** ***** ****** ****** ****** ******* ** ********** elasticC) highly ********* ** ******* elastic Answer: ***** * ******* ******** in conjunction with ******* ** ****** ******** ******** **** ** ************* ****** ****** **** D) ********** ************* B 9) Two ******** *** if the ******** ******** ** one increases when *** price of the ***** increases A) ****** B) ********** complementary D) *********** ******* **** When total revenue increases **** ****** ** $26000 when ******** increases from ***** ** *** marginal ******* ** ***** ****** $3000 ** $4000 C) ***** ** $2600 Answer: B 11) **** total ******* ******* its peak *********** ****** ** marginal ******* *********** *** zero C) **** Cannot ** ********** **** *** information ***************** ****** The demand *** ***** **** ** **** *** production ** * final product ** called A) ******** ****** B) ********* ******** partial ****** ** ******* *************** ****** *********** **** ****** ********** ** ******* as *** percentage ****** ** quantity divided ** *** ********** ****** ** price ** price ********* *** ** percentage ***** quantity ***** **** **** ***** *** ******* ***** revenue will A) ******** B) ********** ****** *** **** ** ****** increase or ***************** ****** **** * one ******* ****** ** ***** ******* in * *** percent change ** ******** ******** ** *** ******** ********* ****** ****** ********** ********* B) unitary ********* ********* ******* D) perfectly ****************** ****** *** ***** ** a ******* ***** ***** **** **** *** ***** ** a **** ** ******* *** ****** from ** cents ** $1 *** ******** **** per **** **** from 18 to * *** *** ********** ** ****** *** ******* is A) **** ** -115 C) *** ** -157 Answer: ****** When purchases ** ****** ***** ******* ********* ** ******** in the ***** ** ****** ******** ****** ****** ********* ****** *** ************ ******* ***** *** items *** ** ********* ****** ************* ** *************** ****** ** ordinary Answer: ****** If *** ****** ********** *********** ****** * *** ********** ** * ********** ****** spent ** * given ******* after a ****** in ****** **** be _ *** proportion of income spent on that ******* ***** ** *** ****** ********** ******* than B) **** ****** ***** to ** ****** ******* **** ** ***** ** Answer: **** ** ******* if there *** **** good substitutes *** * ***** product *** demand ********** **** ****** **** ** *** ** indeterminate ** ************* A 19) *** ******* demand ***** *** * ******* ********* **** ** **** ************* *** larger ** *** ******** of total cost going ** **** componentB) *** more ********* ** *** ****** curve *** *** ***** ********* *** **** ******* are *** ****** ****** ** cooperating ********* *** **** ********* is the ********* in question Answer: B 20) ** income **** *** ********* feel "better **** **** **** ***** consumption **** **** ***** ****** ***** more ************ **** ***** improved economic ********** inferior ** ******** ** ****** ** ********* ******* **** If the *********** ** ***** does not ****** ** *** following a ***** ******** **** ** cents *** ***** ** 58 cents *** pound *** ****** *** ***** ** considered ** be A) ********** ********* B) ********* elasticC) ********* ********* D) ******* **************** ****** **** *** consumption ** ******* (whose ***** *** *** changed) ********* ********* ** ******** ** the price ** beef *** *** ******** can ** considered ** ****** complements ** *********** C) ********* ** ******************* ****** ** *** income elasticity ** * ********** product ** *** ** ***** ** ************** a ******** **** ** * ****** ****** an ******** good D) ** ******* good Answer: ****** ** a **** ********* *** price ** a product *** ***** ******* ********* ******** *** demand *** **** ******* is ***** ********* *** ****** for this ******* ** ***** inelasticC) the ***** ********** ** ********** *** ****** ********** is **** **** ********** ****** If *** price of * ******* ** ********* *** ***** ******* ******** from *** **** ** **** product increases **** *** price ********** ** demand *** the ******* ****** ********* *********** ********* **** ** *** ************** B 26) If ***** is an ******** in ******** ****** *** *** ****** *** * ******* ******** **** the ******* ****** * luxury **** ** a ********* ****** * ****** **** D) an ******** good Answer: ****** If *** ***** ** ******* * increases *** this ******* ** a decrease ** *** demand *** ******* B **** ******** * *** B ******* complements B) *********** ** ******** D) *************** A 28) If *** ***** of * product ** ********* *** total ******* ******** **** *** sale of **** product **** *** ****** then *** ***** elasticity ** ****** *** *** ******* **** ******* ** inelastic C) ******* D) **** ** *** ************** ****** ** *** ****** *** * ******* ** ***** ********* and *** ******* price ** ********* **** *** marginal ******* **** ******** by *** ****** ******** *** ******** decreaseC) ********** ***** ** ********** **** this information Answer: ****** ** *** price elasticity ** ****** ** * ******* is ******* and the product ***** ********* **** *** ******** ** *** product ****** ****** ****** ******* than the increase ** ******* **** **** *** increase ** priceC) *** **** ** the ******** in priceD) ***** ** ********** from this information Answer: ****** ***** ** *** ********* ** *** * *********** ** ***** ********** of demand? A) product durability ** technologyC) **** ** ************ D) ********** ** ***** ************ ******* **** If government ******* a price ******* ** a ******* **** ** ***** *** ****** *********** ***** ******** a ******* will ********* * ******** will ********* ********* **** ****** ***** sales ******* consumers will ****** their demand *** the product Answer: ****** If ********** ******* * price ***** ** * ******* that ** above *** market equilibrium price ******** * surplus **** ********* a ******** **** developC) ********* **** ******** ***** ***** ******* ********* **** ******** ***** demand *** the product Answer: ******** ** ********** ******* ** excise *** ** * ******* and *** *** burden is ***** equally ** ****** and ******* ******** ***** ********** of ****** ** ********* price ********** ** ****** ** ********* *** ******** values ** ***** ************ ** demand *** ****** *** ******* **** of *** ************** ************* *********** *** ******* ***** of a *** of ****** ** $1 *** at **** price *** cups *** ******** If *** price falls ** $090 *** quantity ******** will ******** ** ****** ********* *** (arc) ***** elasticity ** ****** *** ******* ***** on **** answer is *** ****** *** ****** ******* or *********** Based ** **** ****** ** * if *** ***** ** ****** ** ********* ** 10% what will happen ** *** revenues **** ******* Carefully explain *** *** know Answer:a *** elasticity = ***** ******** ******** **** **** ****** ** ******* *** thus * ** ******** ** ***** will lead ** * greater ********** ******** ** quantity ******** ******** **** ******* *** ***** increase does *** **** ** *** *** ********* ** ********* *** ****** curve *** QD * *** - 1/2 ** ********* the ******* price ********** ** demand when price ** **** ** ****** ******* or *********** ********* *** ******* ***** ********** ** demand when ***** is **** ** demand ******* or inelastic?c Find *** ***** at ***** ***** ********** ** ***** ** -1 Answer:a ********** * -1/2 ********* = **** *** is inelasticb Elasticity * -1/2(700/150) * *** and is elasticc Elasticity ** ** ** the ******** ** the ****** ***** ***** ** at * ***** ** **** and a quantity ** 250 3) ******* that *** ***** ********** ** ****** for ***** is ***** ** ** -075 **** * **** wheat **** ****** increases the ****** ** wheat) ** ****** to ******** ** decrease the ******** ** farmers? Carefully explain Answer: * good ***** **** **** ********* *** ****** ** ***** **** ***** *** *********** ************ ** decrease **** quantity ** ********* Since ****** is ********* ***** ******** **** **** ** *** ********** ****** in quantity **** ** less than *** ********** ****** ** price 4) *** ****** ********** for most ****** foods such as wheat ** ***** ** ** ******* **** and onea ** incomes **** **** **** **** **** ****** ** *** ****** *** ******* **** **** happen ** the ******** ** ***** ********* by *********** What **** happen to the percentage ** ***** ******* **** consumers ***** on wheat?d All ***** things equal *** ******* ****** to ** relatively better off or ********** ***** *** ** periods ** ****** ****************** ****** **** ******** since wheat *** * ******** income *********** The ******** ** wheat ********* will increasec The ********** of ******** ******* ***** on ***** *** ***** ****** ***** **** **** ***** the ********** ****** ** the ****** for ***** **** ** less **** *** ********** ****** ** ******* Farmers are ****** to ** ********** ***** *** ***** the ****** *** what **** are ******* **** ** rising **** ******* **** the ****** *** ***** ***** **** they are ****** to ************ *** ****** for salt is ********** price ********* ***** the demand *** ******** ** ********** ***** ******* *** *** *** **** explain why? Answer: Salt has *** substitutes and takes ** * ***** percentage ** the consumer's ****** and thus ****** is likely to ** ********* While ******** *** **** * ***** **** ** the ****** there *** **** *********** ************* Unions **** ********* bee *** **** ********** ** ********** *** ******* wages ** skilled ****** **** ** ********* **** in ********* trades *** *** **** of derived ****** ** explain why Answer: ***** are ** ***** *** ******* *** ** **** the ********** ** ************ ******* ******* ******* and ***** ******* ** production ** **** **** firms ****** substitute **** other ****** ** ********** ** ***** **** Secondly ******* ***** is ****** ** ** * ********** ***** ********** of ***** ***** *** **** ******* ***** **** *** cause * ***** increase in ***** ***** ****** would **** ** * ********* ** ****** ** ******** in ***** and a ******** ** output) Unskilled ***** *** **** *********** *** ** ****** ** ** * ****** ***** ** ***** for ***** that ****** ** *** **** if ****** raise ***** ***** ****** ***** ******* of ********** *** many workers will ** **** off 7) *********** impose excise ***** ** ***** **** **** ********* demand **** as ********** more ***** **** ** other ***** ************* ******** ** ****** *** ******* *** ****** ** the **** reducing equilibrium ******** *** ******* *** ***** ** ****** ** ******* taxes will tend ** reduce ******** ** * *********** amount and thus ********** tax revenues **** ** ********** ***** ******* ** ****** ** ********* *** ********* in ******** **** ** ***** *** government tax revenues will be higher ************ *** also impose ***** ** deter *********** *** **** ** likely ** ** *********** if ********** ** ******** ****** *** ****** in *** ***** ****** are ***** ***** * **** - **** * and QS * **** * **** ****** * ** millions of bushels *** * ** ***** *** bushela Find *** equilibrium ***** and ********* ******* that the government ****** ** ******* **** ****** and thus **** * price ***** ************* **** *** **** of *** **** ******** What ** the **** ** **** ******* to the ********************* * * **** * * **** ** * = **** QD * *** *** QS * **** *** surplus is *** ********* ******* * $150□500 = $750 *********** ****** ** ***** *** QD * **** * *** ******** supply *** ** = 25P and Foreign producers can ****** any quantity at * ***** ** **** ** ******* ********* *** **** ** *** domestic ****** **** ** *** equilibrium ****** **** is *** equilibrium ********* *** **** ** sold ** domestic and ******* ********* respectively?b Under domestic ********** ******** ******* ********* *********** agree ** restrict their goods **** **** ****** ** *** ***** *** quantity? **** **** ****** ** *** ****** that ******** ********* supply? **** **** ****** to ******** ** domestic *** ******* ******************** P = *** * = ***** Of that ******** ********* ****** **** ***** *** foreign producers supply **** ****** The quantity *********** **** ***** equilibrium ***** ** rise *** quantity to ******** Domestic ********* will **** **** and ******* producers **** sell **** ******** ** ******** ********* **** rise The effect ** *** revenues ** ******* producers ** unclear; if demand ** ********* they *** ********* *** *** **** **** the price elasticity ** demand *** ******* ** **** *** ****** elasticity ** ******* ** * and the *********** ********** of ******* and gadgets ** * ********* ******* **** *********** *** *** gather **** **** of these figures Answer: ****** *** **** **** is inelastic **** ******* to ***** **** is * ****** **** ** ****** elasticity is ******* **** **** *** ** ** a *************** **** ** ****** elasticity ** ******* than one Widgets and ******* *** substitutes *** **** *** good substitutes ******* cross-price elasticity ** ******* (large) 11) If * ********* ****** ******** *** * * ** - ** then ********* *** price ********** ** ****** ***** product ***** is ** ***** *** point ********** formulab ******* ***** ** ** ***** *** point elasticity formulac ******* ***** ********* **** $4 ** ** ***** the *** ********** ********** product ***** ** $5 using *** ***** ********** formulae ******* ***** ********* **** ** ** ** ***** *** *** ********** ******* ******* *** ***** (b) ***** *** ***** *** ***** *** ******** ** * ***** ** **** ** **** a bushel **** ******* ***** ** ******** ** *** ***** ***** ******* bushel 4000 bushels would ** ********* **** ** *** (arc) price ********** of ******** Based on **** ****** ** the ***** ** corn **** ** **** * ****** what ***** ** *** ****** *** ****** ** *** price ** corn ********* **** $400 to **** a ****** what ***** be the change ** total ******* *** sellers of ****** If *** price ** **** increased **** **** to $500 * ****** what ***** be *** ****** ** ***** ******* for sellers ** ************** *** ***** *** **** (c) ****** *** +$545 13) Domestic demand *** * ******* is: ** * **** * 25P the ******** supply of the ******* *** ** = 20P *** foreign producers *** ****** *** ******** ** * ***** *** ** **** What ** *** ******** equilibrium ***** *** ********** ** **** ******** *********** ***** *** **** ** *** ******* will ** ******** ** ******** producers and how **** by ******* ******************** P = $30 *** Q * 2250b ******** ********* supply *** units *** ******* ********* ****** 1650 ************** * ****** ********** and **************************** *********** If a regression *********** ****** the ****** ** ***** ******** *** ********** ******** ** ******* *** ********** *********** ** significantly ********* **** ****** *** ********** coefficient *** ** **** for ************* *** ********** *********** should ** included ** the ********** equation Answer: B 2) Which ** *** ********* ** * **** ** *** statistical significance ** *** ****** ********** ************* ****** ** ** C) F-test D) Durbin-Watson **** ******* C3) Which of *** ********* ** a **** of *** statistical ************ ** a ********** ********** **************** ****** ** ** ** F-test D) ************* **** ******* *** ***** of the following ** * ******* ** *** explanatory power of *** regression ********** ****** ** ** C) ****** ** ************* test ******* *** **** * ********** coefficient ** *********** at *** ** ***** it means ******** ***** is only a **** percent chance **** ***** will be an ***** ** * forecastB) ***** ** ** percent ****** **** the regression *********** is *** true population ************* ***** ** * **** ******* ****** or **** **** the ********* *********** ** ****** ***** ** * five ******* ****** or **** that *** ********** *********** ** not *** **** ********** coefficient Answer: ********* *** following *********** based on the ********* ********** equation ********* ****** ** ************ * ******* = **** * **** + **** + *** **** *** ********* ** * ******** ******** ** ******* * ** * ***** ** ******* A PB = ***** of * ********* ******* B *** I = *** ****** income6) Using *** ***** ** 2" ***** ** the following ********* can be deemed ************* **************** **** **** *** *** ** *** aboveE) **** ** *** above Answer: A 7) *** which ** *** ********* ********* ****** * **** ***** t-test be ************ * ** * ** ** D) Should ** applied for all Answer: ***** ***** ** *** ********* ****** ** * ********** **** *********** among *** *********** ********* of a ********** ************* ***************** the ******** ********* ************* insignificant regression coefficientsD) multicollinearity Answer: D9) When *** ** ** * ********** equation ** **** **** ** ********* that A) *** the coefficients *** ************* ************* *** ********* **** has ** economic meaningC) * high ********** ** *** ********* in *** *********** variable *** ** accounted *** by the ********* ** *** *********** variablesD) ***** ** * **** chance of ****** correlation and so *** ******** **** ** ****************** ****** *** *********** ** a ****** ********** ******** ************* *** ****** in *** ********* ******** ******** ** * **** ****** ** *** *********** variableB) *** ****** ** *** *********** ******** relative ** a **** ****** in the dependent variableC) the percentage ****** ** *** ********* ******** relative ** * **** ****** in the *********** ********** *** percentage ****** ** *** *********** ******** ******** ** a **** change in *** dependent ***************** A 11) *** *** ********** ******** * * *** - **** + **** ***** ** the ********* ********** ** ********* ** is the more important variable because ** ** positiveB) **** X1 ********* ** one **** * ********* ** ** unitsC) **** ** increases by 10 ***** * decreases ** * ****** **** ** increases ** *** **** * decreases ** ** ************** ****** When ***** ********** ******** *** *********** the ********** ******** ************* *** ****** of ********** **** *** *** ** the equation's R2B) *** ***** ** which *** value ** *** dependent variable ** ******** to lie **** * ***** degree ** probabilityC) *** degree ** ********** **** one *** ** *** regression ************** *** ***** in ***** *** ****** outcome of a forecast ** ***** ** ************ ****** ***** ** *** following ********** will ****** improve when more ********* *** ***** to * regression ************* *** ********** of *** ************ ** *** t-testC) ** ** *** ******** ****** of *** coefficients Answer: **** *** *** of * ***** ******** ** ********** ************ indicates that a ********** **** *** really **** **** ** ******* ** *** equationB) ********* **** * ******** is ******** ** ****** have or *** have ** impact ** a ********* ********** indicates **** ************ **** ** ********* *** the ********** ********* *** use of ************ ************* ****** In using regression ******** ** ******** ****** ***** ** the following ******** is most ******** * ****** ** insufficient ********* *** ************** problem ** *** problem ** * *** **** *** ******* ** **** ******** ****** ** *** problem of insignificant ************ ******* **** ********** ******** can best ** ********* as A) * *********** ********* for ********** *** **** ************ ******* *** variable and * set ** ***** ******** variablesB) a statistical technique for determining *** **** ****** of *********** * *********** technique *** ******** ********** relationships ***** variablesD) **** of *** ************** A 17) ** is a *********** measure ********* ********** *** ********* *** variable ** ** explaining *** ***** ** ******* variableB) tests *** true ***** ** * ********** determines how **** an ******** *** ******** *** ************ between *** variable *** * set ** other *********** All ** *** ************** C 18) The ****** ** a *********** ******* ********* ***** *** true ***** ** * variableB) ***** *** *********** significance ** * ********** coefficientC) ***** *** *********** significance ** * ********** ********** **** of *** ************** ****** *** problem ** *************** ****** toA) independent ********* in a ********** ******** ***** ****** are closely related to **** otherB) insufficient **** ** ******** egression *********** valuesC) regression *********** ****** which *** *** significantly different from ****** regression equation variables ***** ******* * similar ******* ** ***** ****** **** * number of **** **************** D 20) * ******** **** ** significance ***** be **** ** ********* *********** ****** *** * ******* ** ***** ********* *** ******** are *********** *** **** ***** ** supplyC) two products are ********* to each ***** in ******** ****** of * ******* ** ***** inelastic Answer: ****** *** F-test ** **** ** ********* ****** a ********** *********** ** significantB) ***************** ******** * ********** ******** ************* ******** *** *** variation ** *** ***** of a dependent variableD) ** ************** problem is **************** ****** In *** estimation ** ****** *** *************** problem" refers to A) the ******* ** ********* *** ****** ***** ** ************** the ******* of ******** whether ** *** **** ****** ** ***** sectional ****** *** ******* ** ********** *** *** ******* ** ***** ** *** ******** demanded **** ****** cannot ** not **** ********** *** ******* of ****** insufficient ********* ** *************** C 23) The t-statistic ** ******** ****** ******** the ********** *********** ** *** standard ***** ** *** ********** ******** the ********** *********** ** *** ******** ***** of *** coefficientC) dividing the ******** ***** ** *** *********** by *** ********** coefficientD) ******** *** ** ** *** ******************** B 24) ***** ** *** ********* ** **** ****** ** ******** * ************* *********** regression **************** t **** ** ** R2 **** 90 ** * >2 D) > ********** ********* *** following question(s) ** the ***** of *** following ********** ******** (Standard ****** in *********** n * 200):Q * **** - ***** * 50PB + ** * 2A; ** *** ***** **** **** (1) ********* ** = ***** ******** ******** ** ******* * ** * *** ***** ** ******* * ** * ** ***** ** product B I * ****** *** capita income and * * $20000 monthly *********** expenditures25) ***** ** the variables **** *** **** the ****** ** *** 05 ***** ** ***************** PAB) **** AD) *** *** *** ********* pass the t-test Answer: B 26) ** * ********** ***** ****** of the ******* ***** ** of greatest ************ the ******** ***** of *** ******** (ie ******* the ********** low ****** ** *** ************ ******* the fact **** *** all of *** ********* *** statistically significantD) *** poor *** ** the ********** **** Answer: **** As the ******* ** ******* * which ** *** following ***** ** ** ******** ******* (based on the regression ******* *********** **** of *** ******* ***** ***** be ** concernB) ** impending *********** ******** on *** by your ************ ** ***** *** price ** **** **** can ***** ***** salesD) * ***** ********* by *** makers ** ******* * ******* **** ***** ** *** ********* ****** be ********** ** the ***** ** the ***** regression ************ *** ****** ** price ********** of ******* *** whether ** not ******* A ** ********** *** ****** ** competition ******* A and *** *** ** the ***** *** be ******************* ****** ***** ********* shows *** **** * ********** line **** ******* the ******* of **** *********** ****** ** R2C) ****** D) Durbin-Watson ************* ****** A dummy ******** ** **** ********** an *********** ******** ** a ******** ********** * ******** variable ** an ******** ***************** B 31) * ******* **** **** the ***** ********** ** ** explanatory ******** ******** **** not pass the ****** B) is ********* as * ***** ********** does *** **** *** ****** D) constitutes **** a ***** part ** R2 Answer: ****** From a management ****** perspective which ********** ****** ** *** **** *********** a ********** ******** **** ****** the ******** a ********** ******** ***** *********** ********* all **** the ******** * ********** equation **** *** the ******* R2D) * ********** ******** **** has *** least number ** ***** variables ******* **** *** **** **** a ****** **** * ******** *** ********** *********** *** *** necessarily *** ******** amount of knowledge and judgment can exercise * disproportionate ****** ** ********* is * ***** drawback ****** *** Delphi ****** ** *********** ** the ****** ******** ******** ******* polling D) *** **** of ********* opinion ***************** ****** *** *********** technique ***** ******** ************* ****** *** ** ******* out ** * sequential series ** written ********* *** ******* ****** *** Delphi method ** *** market ******** methodC) opinion polling D) the **** of executive ******* approach Answer: ****** Average weekly ****** for ************ insurance money ****** and the ***** of ***** ****** *** *** ******** of A) ******* ********** ** ********** ************ ******* ********** ** **** ** the ************** ****** *** ** *** ****** included among *** lagging ********** ****** *** ****** ** sensitive ******** ******** the ***** ** ********** ************ ********* ** **************** payrollsD) ******* ******** of unemployment Answer: D 37) *** ********* is *** one of *** leading *************** ***** ** consumer expectations U ** ********** change in ******** ***** ***** for servicesC) vendor *********** ****** deliveries ********* indexD) ************** new ****** ********** capital ************** B 38) ***** ** the ********* is * leading ******** ************** ******* ***** ************* B) ***** supply **** stock ****** *** common ****** D) *** of *** ************** ****** The ****** ** forecasting **** leading ********** *** ** criticized A) *** ************ forecasting * recession when none ensuesB) for *********** the ********* of the ******* but *** the **** of *** ****** in economic ********** *** ******** revisions ** data after original ************* *** of the ************** ****** * ******* **** ** ***** ** **** ** ***** * period ** ********* *** ******* ************** ******** *********** ******** * recession (or ** ***** * ******* of the ******** **** ********** ***** ** **** ** five D) six ******* A41) The *********** ********* ***** involves the *** ** *** ***** ******* statistical ****** ** ******* trends *** ***** into ******* ******** *** ******** ************ is known as A) compound ****** **** projection ** the Delphi ******** **** series ********** D) *********** ********* projection Answer: ****** ************ *********** **** projects **** **** without explaining the ******* *** future trends ** called A) ********** *********** B) **** ************* empirical *********** ** ****** ******************** ****** *** following ** not * drawback ** *********** ***** *** ******** ****** **** *********** **** considers ***** *** last ************** considers **** equal ******** ********* ********** ************ ******* the ******** *** ******** ************** **** *** ******** *** ****** ** *** ************* ****** ******** ************ ** a semi-logarithmic ***** will **** *** ******* ** ********* *********** absolute ******* **** ****** ** period *** ********** ******* ********** ******* **** ****** ** period are constantC) whether ********** ******* **** period ** period *** decliningD) Both * *** C ******* ****** A major problem ** ********** **** * ***** line is that A) **** ************* *********** *** ** ************** ** ** ***** only ** *** trend ** ******** ** **** *** ******** ******* ****** ** ********** it ** * **** ******* ****** of forecasting Answer: ****** The following ** *** *********** ***** equation ** forecast sales ******** * * * * **** ** * = * * btC) * = * * **** * c(t)2 ** **** of the ************** B 47) ***** *** advantages of *** ********* ** *********** *** ease ** *********** ********** ****** *********** *** ********** ****** *** *** ******* ** ******* *** ******* with *********** regarding *** *********** significance ** ******* and *** **** ** statistical errors A) ************* trend analysis ** ******** growth ****** visual trend-fitting D) expert ******* ******* **** ***** *** ********** ** *** ************* ***** ******** ********** ****** *** **** ** ************* relatively ****** ********** ***** ********** *** ******* ** provide *********** ********* the *********** significance ** *** resultsD) All of *** above Answer: D 49) *** *********** method that ******** using ** ******* of past observations ** ******* *** future *** *** forecaster ***** **** *** ****** ** a ********** ** some ******* ** **** ******** is the A) moving ******* ******** *********** *********** methodC) *********** ********* ******** Both A *** *** **** * *** * ******* E 50) ** *********** forecasting ********* ** ***** *** ******* **** ****** *********** ********* **** help ********* *** ********* variable is ********** *********** smoothing ** regression analysisC) ***** analysis ** moving ******* method Answer: B 51) **** *** more ****** ************ *** **** ******** to *** estimate of the next ****** **** ******** ************ the ***** forecasting ****** to ****** ****** *********** ********* ** ******** ****** ****** ***** analysis ** ****** averages Answer: A 52) ***** of *** ********* is * Leading ******** Indicator? A) ********** *** industrial ***** ************* ********** ************ ******* ****** duration ** ************** **** ** the ************** D 53) ***** ** the ********* ** * ******* ******** ************** ****** ** average ***** costs ** manufacturingB) ** ******* ** *** money supplyC) ********** productionD) **** ** the ************** ****** *** ****** ****** ** ***** ********* ********* in forecastingB) ********** ******** ***** on expert opinionsC) ******** growth approach ** ************* ****** *********** ***************** ****** *** ****** ** **** in forecasting to A) ********* ********** ********* *** testing ********** ************** ******* *** ****** ** multicollinearity among *********** *********** ********* how **** * ********** ******** *** ******* *** ********* variable valuesD) ********* whether ** ************** ******* exists Answer: C 56) *** ***** ********** ******** ** forecasting is *********** ****** *********** *********** ** exponential smoothingC) ******* ***** ** *** ** the above Answer: D Analytical ************ ********* ********* ***** ** this ********** equation (Standard errors in ************** * ***** - ** * * **** A * 4 ** * 2 I (5234) ***** ***** ***** ****** * 065N = **** * ************ ***** ** * ******** * 565 * * ******** ********* * Price = ***** * Advertising expense ** ********* = ** ** * ***** ** ************ product * **** * * ******* ******* ****** * ******** ********* the elasticity for **** variable *** ******* comment ** **** *********** **** ***** you ** **** ************* Based on the ******* above ** * ********** ********** * -10(7000/66000) = **** ****** is ******* *** **** ***************** ********** * 1500(54/66000) = 123 *** ******* ** ******* **** ******* ** ************ a ** ******** in *********** ******* **** **** ** a greater than ** ******** in sales Cross elasticity * 4(8000/66000) * *** **************** ** ******** ******** that *** ******** *** *********** but ** is **** **** one ********** **** **** *** *** ************ **** *********** *** *** competitor's ***** *** little impact ** *** firm's *********** elasticity * ************* * 012 *** ******* ** ****** ********** **** ** is a ****** **** (necessity) *** ** not ************ ********** ** income **************** ********* ************ *** each ******** *** ******* **** **** ***** ************ Price: 10/229 * *** ************ ******** * 286 ************ price: ***** * 229 ******* **** * ****** ********* *** ************* *********** **** *** exception of ****** **** ** *** conclude **** *** ***** ********* do **** ** impact on *** ******** demanded of **** product 3) How ** *** ** ***** ********** and **** *********** does this give you? Answer: R2 = RSS/TSS * * * ********* where *** * *** ** squared ********** ** the sample values ** * from ***** mean *** * *** ** squared ********** ** the estimated ****** **** ***** **** *** *** * *** ** *** ******* deviations ** *** ****** ****** **** ***** ********* values *** ** ***** ***** *** **** percentage ** *** ********* ** the ********* variable ** ********* ** variation in the independent variables ** *** ********* of fit" ** *** ******** ** **** **** 65% ** *** ********* in ******** ******** is ********* by ********* in the independent variables 4) How would you ******** *** ******* of **** ******** ******** ** *** have *** ********* Explain Answer: *** ******* ******** ** significant ** ***** by *** ****** *** R2 ***** is reasonably **** *** variable is *** *********** (might ** desirable ** re-estimate *** ******** ******* it ***
