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Multiple Choice Quiz
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1
Which of the following provides an indication that an individual parameter estimate is significantly different from zero?
A)R-square.
B)Adjusted R-square.
C)t-statistic.
D)F-statistic.
2
Suppose the demand for a product is ln Q = 4 – 2 ln P. The demand for this product is:
A)unitary elastic.
B)elastic.
C)inelastic.
D)Cannot be determined without more information.
3
Given a log-linear demand curve, we know that
A)demand is elastic at high prices.
B)demand is inelastic at low prices.
C)demand is unitary elastic at low prices.
D)the elasticity is constant at all prices.
4
The demand for good X has been estimated to be Qx = 12 - 4Px + 6Py. Suppose that good X sells at $3 per unit and good Y sells for $5 per unit. Calculate the own price elasticity.
A)-0.3.
B)-0.4.
C)-0.5.
D)-0.6.
5
The own-price elasticity of demand for oranges is -2.5. If the price of oranges increases by 4%, what will happen to the quantity of oranges demanded?
A)It will increase 6.5%.
B)It will increase 10%.
C)It will fall 6.5%.
D)It will fall 10%.
6
If quantity demanded for sneakers falls by 12% when price increases 4%, we know that the absolute value of the own-price elasticity of sneakers is
A)0.3.
B)0.8.
C)3.0.
D)3.3.
7
If the cross-price elasticity between potato chips and chip dip is -3, a 4% increase in the price of potato chips will lead to a
A)12% drop in quantity demanded of chip dip.
B)12% drop in quantity demanded of potato chips.
C)12% increase in quantity demanded of chip dip.
D)12% increase in quantity demanded of potato chips.
8
If the income elasticity for designer jeans is 0.8, a 10% decrease in income will lead to a
A)2% drop in demand for designer jeans.
B)12.5% drop in the demand for designer jeans.
C)8% drop in demand for designer jeans.
D)None of the above.
9
You are the manager of a popular hand bag company. You know that the advertising elasticity of demand for your product is 1.5. How much will you have to increase advertising in order to increase demand by 6%?
A)0.25%.
B)4%.
C)4.5%.
D)25%.
10
The ratio of the value of a parameter estimate to the standard error of a parameter estimate is known as
A)the p-value.
B)confidence intervals.
C)the F-statistic.
D)the t-statistic.
11
If the own price elasticity of demand is equal to zero, then
A)demand is perfectly elastic.
B)the demand curve is horizontal.
C)consumers do not respond at all to changes in price.
D)Both b and c.
12
The demand for Adidas brand shoes is
A)more elastic than the demand for shoes in general.
B)less elastic than the demand for shoes in general.
C)equally elastic to the demand for shoes in general.
D)none of the above.
13
Assume that the price elasticity of demand is -3.5 for a certain firm's product. If the firm increases 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.
14
Which of the following is a correct statement about the own-price elasticity of demand?
A)Demand tends to be more elastic in the short-term than in the long-term.
B)Demand tends to be more inelastic for goods that comprise a smaller share of a consumer’s budget.
C)Demand tends to be more inelastic as more substitutes are available.
D)All of the above.
15
As a general rule-of-thumb, a manager can be 95 percent confident that the true value of the underlying parameter in the regression is not zero, when the absolute value of the
A)t-statistic is greater than or equal to two.
B)p-value is greater than or equal to two.
C)F-statistic is greater than zero.
D)Both a and b.





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