# econ 315

1. Assume that the price elasticity of demand is -2 for a certain firm’s product. If the firm raises price, the firm’s managers can expect total revenue to:

A. Decrease

B. Increase

C. Remain constant

D. Either increase or remain constant depending upon the size of the price increase

2. A price elasticity of zero corresponds to a demand curve that is:

A. Horizontal

B. Downward sloping with a slope always equal to 1

C. Vertical

D. Either vertical or horizontal

3. As we move down along a linear demand curve, the price elasticity of demand becomes more

A. Elastic

B. Inelastic

C. Log-linear

D. Variable

4. Suppose the demand for a product is Q_{X}^{d} = 10 – lnP_{X} then product X is

A. Elastic

B. Inelastic

C. Unitary elastic

D. Cannot be determined without more information

5. The demand for good X has been estimated by Q_{X}^{d} =12 – 3P_{X} + 4P_{Y}. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity.

A. -0.2

B. -0.3

C. -0.5

D. -0.6

6. If quantity demanded for sneakers falls by 10% when price increases 25% we know that the absolute value of the own-price elasticity of sneakers is:

A. 2.5

B. 0.4

C. 2.0

D. 0.27

7. The demand curve for a good is horizontal when it is:

A. A perfectly inelastic good

B. A unitary elastic good

C. A perfectly elastic good

D. An inferior good

8. Suppose Q_{X}^{d} = 10,000 – 2 P_{X} + 3 P_{Y} – 4.5M , where P_{X} = $100, P_{Y} = $50, and M = $2,000. What is the own-price elasticity of demand?

A. -2.34

B. -0.78

C. -0.21

D. -1.21

9. If the cross-price elasticity between good A & B is negative, we know the goods are:

A. Inferior goods

B. Complements

C. Inelastic

D. Substitutes

10. If the price of pork chops falls from $8 to $6, and this leads to an increase in demand for apple sauce from 100 to 140 jars, what is the cross price-elasticity of apple sauce and pork chops at a pork chop price of $6?

A. -0.1.17

B. 2.71

C. 0.42

D. -0.86

11. If the income elasticity for lobster is 0.4, a 40% increase in income will lead to a:

A. 10% drop in demand for lobster

B. 16% increase in demand for lobster

C. 20% increase in demand for lobster

D. 4% increase in demand for lobster

12. Suppose the demand for good X is lnQ_{X}^{d} = 21 – 0.8 lnP_{X} – 1.6 lnP_{Y} + 6.2 lnM + 0.4 lnA_{X}. Then we know goods x and y are:

A. Substitutes

B. Complements

C. Normal goods

D. Inferior goods

13. Suppose the demand function is given by Q_{X}^{d} = 8P_{X}^{0.5} P_{Y}^{0.25} M^{0.12} H. Then the demand for good X is:

A. Inelastic

B. Unitary

C. Elastic

D. Perfectly elastic

14. Which of the following is used to determine the statistical significance of a regression coefficient?

A. T-statistic

B. F-statistic

C. R-square

D. Adjusted R-square

15. Which of the following provides a measure of the overall fit of a regression?

A. T-statistic

B. F-statistic

C. R-square

D. The F-statistic and R-square

16. Which of the following measures of fit penalizes a researcher for estimating many coefficients with relatively little data?

A. T-statistic

B. R-square

C. Adjusted R-square

D. Neither the t-statistic, R-square nor the adjusted R-square

17. The demand for good X is estimated to be Q_{X}^{d} = 10,000 – 4P_{X} + 5P_{Y} + 2M + A_{X,} where P_{X} is the price of X, P_{Y} is the price of good Y, M is income and A_{X} is the amount of advertising on X. Suppose the present price of good X is $50, P_{Y} = $100, M = $25,000, and A_{X} = 1,000 units. What is the own-price elasticity of demand for good X?

A. -0.003

B. -0.03

C. -0.3

D. -3

18. The demand for good X is estimated to be Q_{X}^{d} = 10, 000 – 4P_{X} + 5P_{Y} + 2M + A_{X,} where P_{X} is the price of X, P_{Y} is the price of good Y, M is income and A_{X} is the amount of advertising on X. Suppose the present price of good X is $50, P_{Y} = $100, M = $25,000, and A_{X} = 1,000 units. Based on this information, the cross price elasticity between goods X and Y is

A. 0.008

B. -0.08

C. -0.8

D. -8

19. The lower the standard error,

A. The less confident the manager can be that the parameter estimates reflect the true values

B. The more confident the manager can be that the parameter estimates reflect the true values

C. The more precisely the parameter estimates the true values

D. The less precisely the parameter estimates the true values

20. The manager can be 95% confident that the true value of the underlying parameters in a regression is not zero if the absolute value of t-statistic is

A. Less than 1

B. Less than 2

C. Greater than 1

D. Greater than 2

21. Suppose a consumer with an income of $100 who is faced with P_{X} = 1 and P_{Y} = 1/2. What is the market rate of substitution between good X (horizontal axis) and good Y (vertical axis)?

A. 0.50

B. -1.0

C. -2.0

D. -4.0

22. The difference between a price decrease and an increase in income is that

A. A price decrease does not affect the consumption of other goods while an increase in income does

B. An increase in income does not affect the slope of the budget line while a decrease in price does change the slope

C. A price decrease decreases real income while an increase in income increases real income

D. A price decrease leaves real income unchanged while an increase in income increases real income

23. Which of the following is true?

A. Indifference curves may intersect

B. At a point of consumer equilibrium, the MRS equals 1

C. If income increases, a consumer will always consume more of a good

D. None of the statements associated with this question are correct

24. A situation where a consumer says he does not know his preference ordering for bundles X and Y would violate the property of:

A. More is be better

B. Completeness

C. Substitutability

D. Complementarity

25. The absolute value of the slope of the indifference curve is called the:

A. Marginal revenue

B. Average rate of substitution

C. Marginal rate of substitution

D. Marginal cost

26. An increase in the price of good X will have what effect on the budget line on a normal X-Y graph?

A. Parallel outward shift of the line

B. Increase the vertical intercept

C. Decrease the horizontal intercept

D. Parallel inward shift of the line

27. Which of the following cases violates the property of transitivity

A. Aâˆ½B, Bâˆ½C, Aâˆ½C

B. Aâ‰»B, Bâ‰»C, Aâ‰»C

C. Aâ‰»B, Bâ‰»C, Câ‰»A

D. None of the statements violates the transitivity property

28. What is the maximum amount of good Y that can be purchased if X and Y are the only two goods available for purchase and P_{X} = $5, P_{Y} = $10, X = 20, and M = 500?

A. 40

B. 25

C. 50

D. 75

29. How does a decrease in the price of good X affect the market rate of substitution between goods X and Y?

A. It increases

B. It decreases

C. Remains unchanged

D. Indeterminable without more information

30. If the slope of the indifference curve is steeper than the slope of the budget line, and X is on the horizontal axis

A. The consumer is willing to give up more of good Y to get an additional unit of good X than is necessary under the current market prices

B. MRS < P_{X} /P_{Y}

C. MRS < – P_{X} /P_{Y}

D. The consumer is willing to give up more of good X to get an additional unit of good Y than is necessary under the current market prices

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