1. The basic structure of every elasticity measure is

Select one:

a. the percentage change in quantity demanded that results from a ten-percent change in price.

b. the percentage change in price that results from a one-percent change in quantity demanded.

c. the percentage change in quantity demanded that results from a one-percent change in (price/income/price of related good).

2. A research article includes the line "While a relatively wide range of estimates has been produced for the price elasticity of demand for cigarettes, most of the estimates from the USA and other high income countries tend to fall in the relatively narrow range from 0.25 to 0.50."

This means that if the price of cigarettes were to decrease 10%, the quantity of cigarettes demanded would

Select one:

a. increase by 2.5% to 5.0%.

b. increase by 0.25% to 0.50%.

c. decrease by 2.5% to 5.0%.

3. The same research article includes the line "the overall price elasticity of teen smoking was 1.44. This was more than three times the estimated elasticity of 0.42 obtained from the study of adults."

This implies that

Select one:

a. teenagers are willing to pay more than three times as much for cigarettes as adults.

b. teenagers will purchase much fewer cigarettes if prices rise than adults, who will only reduce their purchases a minor amount.

c. teenage cigarette demand is inelastic, while adult cigarette demand is elastic.

4. The point elasticity for the demand function Q=1003.5PQ=1003.5P at the ($10, 65) point is

Select one:

a. 3.565$10=22.753.565$10=22.75

b. $10$1065=1.538$10$1065=1.53

c. 1003.5(10)=651003.5(10)=65

d. 3.5$1065=0.538

5. You overhear an economist saying that the demand for magnesium groovehelmets is inelastic. This means that a given price change will induce a large quantity demand response.

Select one:

True

False

6. At its current price, demand for magnesium groovehelmets is inelastic. If its price were to decrease, total revenue would be expected to rise.

Select one:

True

False

7. Which product would tend to have the most elastic demand?

Select one:

a. A penthouse apartment across the street from Central Park in New York City.

b. A refrigerator that is needed after your old one unexpectedly stops working.

c. A typical three-bedroom, two-bathroom home in the suburbs.

d. An Almond Joy (coconut, almonds, and chocolate) candy bar.

8. Use the table below for the following questions:

Q (sales)	Total revenue	Marginal revenue
0	0	0
1	15	15
2	28	13
3	40
4	50	10
5		5
6	57
7	55	-2
8	50	-5
9		-10
10	28	-12

The marginal revenue associated with the 3rd unit is____________________

9. The total revenue associated with the 5th unit is___________________________

10. The marginal revenue associated with the 6th unit is____________________

11. The total revenue associated with the 9th unit is________________

12. If demand is such that P=402QP=402Q, then

Select one:

a. MR=40Q2Q2MR=40Q2Q2

b. MR=40QMR=40Q

c. MR=404Q

13. What is true at the quantity where total revenue is maximized?

Select one:

a. Demand is inelastic.

b. MR is positive

c. The elasticity value = 1

d. MR is negative

14. "Every company needs to worry about a recession." This statement should be modified because

Select one:

a. companies that sell inferior goods (negative income elasticity) will likely enjoy more sales during a recession with falling incomes.

b. companies with a negative cross-price elasticity will likely enjoy more sales because recessions do not affect the sales of complementary products.

c. companies that sell normal goods will likely enjoy more sales during a recession with falling incomes.

d. companies that sell goods with a high own-price elasticity of demand will likely enjoy more sales as their prices rise during a recession.

15. Everyone knows that the biggest rival to your company (Frank's Fantastic Fudge-Filled Fedoras) is Nate's Nutella-eNgorged Neckerchiefs. On a lark and using sales and price data, you estimate the cross-price elasticity between Frank's and Nate's two products to be 0.08, while the cross-price elasticity between Frank's product and Cole's Cocoa-Covered Corduroy Caps is 1.12. Your calculations suggest that

Select one:

a. consumers consider Frank's and Cole's products to be better substitutes than are Frank's and Nate's products.

b. consumers consider Frank's and Cole's products to be more complementary to each other than are Frank's and Nate's products.

c. Frank's should be more concerned if Nate's drops the price of their product than if Cole's drops the price of their product.

d. consumers consider Frank's and Nate's products to be better substitutes than are Frank's and Cole's products.

16. In a simple time-series regression that you've run, where sales were linearly related to timet, the estimatedt coefficient is negative and statistically significant. This suggests that as time goes on, sales are expected to increase but not as quickly as they've increased in the past.

Select one:

True

False

17. A linear trend equation for sales of the form

Qt=a+btQt=a+bt

was estimated using annual sales data for the period 2003 - 2010 (i.e., t = 2003, 2004, ..., 2010). The results of the regression are as follows:

Dependent Variable: QtQt	R2R2	F-ratio	p-value on F
Observations: 8	0.7034	14.23	0.0093
Variable	Parameter Estimate	Standard Error	t-ratio	p-value
Intercept	-23,024,200	8,122,205	-2.83	0.0298
t	12,045	6,075	1.98	0.0947

17. The parameter estimates for the intercept andt variable are both statistically significant at the 10% level.

Select one:

True

False

18. The statistical estimates indicate a(n) ___________ (upward, downward) trend in sales of _________ units per year.

Select one:

a. Upward; 12,045

b. Upward; 70.34%

c. Upward; 6,075

d. Downward; 23,024,200

19. In 2011, sales are forecasted to be _________ units.

Select one:

a. 14,056

b. -22,915,795

c. 1,198,295

d. 3,456,285

20. Why would certain data be seasonally adjusted?

Select one:

a.If, his torically, there were predictable upward or downward trends in the data during winter or summer months.

b. If sales were expected to be down each season (summer, fall, winter, and spring) during a particular year.