Please assist with answering the attached Finance questions. Please provide detailed instructions of how you got your answers. Please see attachment.

Chapters 5-6 REVIEW Chapters 5-6 5-2 A typical indifference curve a. shows all combinations of goods that give a consumer the same level of utility. b. shows that as a consumer has more of a good he is less willing to exchange it for one unit of another good. c. shifts out if income increases. d. both a and b e. all of the above 5-3 The rate at which a consumer is ABLE to substitute one good for another is determined by a. the indifference map. b. the marginal rate of substitution. c. the consumer's income. d. the ratio of the prices of the goods. 5-4 A utility function a. shows the relation between prices and a consumer's utility. b. shows the relation between income and a consumer's utility. c. shows the relation between the amount of goods consumed and a consumer's utility. d. all of the above e. none of the above 5-6 The slope of an indifference curve shows a. the change in utility from an additional unit of the good. b. the rate at which the consumer is able to substitute one good in the market. c. is equal to the price ratio at all points. d. is the rate at which the consumer is willing to exchange one good for another, utility held constant. e. all of the above 5-8 Suppose that 2 units of X and 8 units of Y give a consumer the same satisfaction as 4 units of X and 2 units of Y. Then a. the consumer is willing to give up 3 units of Y to obtain 1 more unit of X. b. the consumer is willing to give up 1 unit of Y to obtain 3 more units of X. c. the marginal rate of substitution of X for Y is 3. d. both a and c e. both b and c 5-13 If the marginal rate of substitution of X for Y is 2, the price of X is $3, and the price of Y is $1, a utilitymaximizing consumer should a. be indifferent between 1X and 2Y. b. prefer 3Y to 1X. c. choose less X and more Y. d. choose more X and less Y. 5-14 If a consumer is choosing the bundle of goods that maximizes utility subject to a budget constraint, then a. b. c. d. e. 5-15 the rate at which income affects the utilitymaximizing choice is equal for all goods. the rate at which the consumer is willing to substitute between goods is equal to the market rate of exchange. the ratio of marginal utility to price is equal for all goods. both b and c all of the above Ronald, who consumes only hamburgers and hot dogs, has a weekly income of $50. He is currently consuming 20 hamburgers, at a price of $2 each, and 10 hot dogs, at a price of $1 each. If the last hamburger and the last hot dog both added 50 units to Ronald's total utility, he a. is making the utilitymaximizing choice. b. should buy more hamburgers and fewer hot dogs. c. should buy more hot dogs and fewer hamburgers. d. obtains more additional utility per dollar from hot dogs than from hamburgers. e. both c and d The price of Y is $10. 5-16 According to the above figure, if the price of X is $5, what combination of X and Y will a utilitymaximizing consumer choose? a. 80X, 20Y b. 120X, 620Y c. 120X, 250Y d. 200X, 620Y e. none of the above 5-17 According to the above figure, the marginal rate of substitution of X for Y at point C is: a. 5 b. 0.2 c. 0.5 d. 0.3 e. a. b. c. d. e. none of the above 5-18 According to the above figure, which of the following are points on the consumer's demand curve for X? $2, 300 units $3, 120 units $5, 120 units both a and b both c and d The consumer's income is $800. 5-20 According to the above figure, what is the consumer's marginal rate of substitution in equilibrium? a. 1.5 b. 2 c. 2.5 d. 0.8 e. unable to tell from information given 5-21 According to the above figure, why doesn't the consumer choose the combination of 30X and 56Y at point A? a. MRS is less than PX PX . b. MRS is greater than PX PY . c. d. 5-22 MUXis greater than MUY . MUX PX is less than MUY PY . According to the above figure, why doesn't the consumer choose the combination at point B? a. b. c. d. e. The consumer is willing to give up more X for additional units of Y than the rate in the market. The marginal utility of Y exceeds the marginal utility of X. The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X. both a and c both b and c 5-28 In spending all his income, the consumer chooses the bundle of goods that maximizes his utility. Which of the following statements will be correct? a. The marginal utilities of all goods are equal. b. Expenditures on all goods are equal. c. The addition to utility of the last unit of the good is equal across all goods. d. The addition to utility of the last unit of the good per dollar is equal across all goods. 6-4 Use the figure below, which shows a linear demand curve and the associated total revenue curve, to answer the question. The marginal revenue of the 700th unit is $_____ and demand is __________ at this point. a. -20; elastic b. -20; inelastic c. 15; elastic d. 15; inelastic 6-9 In the figure above, what is the point price elasticity of demand when price is $60? a. 0.50 b. 0.75 c. 1.00 d. 1.60 e. 2.00 6-10 In the figure above, what is the point price elasticity of demand when price is $80? a. 0.50 b. 0.75 c. 1.00 d. 1.60 e. 2.00 6-11 In the figure above, what is the interval elasticity of demand over the price range $60 to $80? a. 0.75 b. 1.10 c. 1.00 d. 1.40 e. 2.00 6-12 In the figure above, if price INCREASES from $60 to $80, an arrow representing the PRICE effect a. will point upward. b. will point downward. c. d. e. will be longer than (and in opposite direction of) the arrow representing the quantity effect. will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. both a and d 6-13 In the figure above, if price DECREASES from $80 to $60, an arrow representing the QUANTITY effect a. will point upward. b. will point downward. c. will be shorter than (and in the opposite direction of) the arrow representing the price effect. d. will be shorter than (and in the same direction of) the arrow representing the price effect. e. will point in the opposite direction in which total revenue will move. 6-14 In the figure above, what is the point price elasticity of demand when price is $40? a. 0.50 b. 0.75 c. 1.00 d. 1.50 e. 2.00 6-15 In the figure above, what is demand elasticity over the price range $40 to $60? a. 2.00 b. 1.00 c. 0.50 d. 0.95 e. 0.71 6-16 In the figure above, if price INCREASES from $40 to $60, an arrow representing the PRICE effect a. will point upward. b. will point downward. c. will be longer than (and in opposite direction of) the arrow representing the quantity effect. d. will be shorter than (and in the opposite direction of) the arrow representing the quantity effect. e. both a and c 6-17 In the figure above, if price DECREASES from $60 to $40, an arrow representing the QUANTITY effect a. will point downward. b. will be shorter than (and in opposite direction of) the arrow representing the price effect. c. will be shorter than (and in same direction of) the arrow representing the price effect. d. will point in the direction in which total revenue will move. e. both a and d 6-56 Refer to the following graph to answer the question: The price elasticity of demand over the price interval $90 to $110 is a. 0.5 b. 1.0 c. 1.5 d. 2.0 e. 0.4 7-1 Demand equations derived from actual market data are a. empirical demand functions. b. never estimated using consumer interviews. c. generally estimated using regression analysis. d. both a and c e. all of the above 7-2 A representative sample a. eliminates the problem of response bias. b. reflects the characteristics of the population. c. is frequently a random sample. d. both b and c e. 7-4 all of the above The estimated demand for a good is Q =25- 5P+0.32M +12PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P 7-5 a. b. c. does not have the expected sign. is negative as expected. should have the same sign as the coefficient on PR . d. e. should not be greater than one (in absolute value). both b and d The estimated demand for a good is Q =25- 5P+0.32M +12PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The good is 7-6 a. an inferior good since the coefficient on PR is positive. b. a normal good since the coefficient on PR is positive. c. d. e. an inferior good since the coefficient on M is greater than one. a normal good since the coefficient on M is positive. none of the above The estimated demand for a good is Q =25- 5P+0.32M +12PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. This good and the related good R are 7-7 a. b. c. complements since the coefficient on M is positive. substitutes since the coefficient on M is positive. complements since the coefficient on PR is positive. d. substitutes since the coefficient on PR is positive. The estimated demand for a good is Q =25- 5P+0.32M +12PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. If income decreases by $1,000, all else constant, quantity demanded will ________ by _________ units. a. decrease; 320 units b. increase; 3.2 units c. d. e. 7-8 decrease; 1200 units increase; 500 units decrease; 500 units The estimated demand for a good is Q =25- 5P+0.32M +12PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. If the price of the good falls by $4, the quantity demanded will ________ by ________ units. a. increase; 5 units b. increase; 20 units c. increase; 50 units d. increase; 48 units e. decrease; 12 units 7-9 The estimated demand for a good is Q =4,800- 16P- 0.65M - 1.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The coefficient on P 7-10 a. b. c. d. violates the law of demand. is negative as dictated by the law of demand. should not be greater than one (in absolute value). should have the same sign as the coefficient on PR . e. both c and d The estimated demand for a good is Q =4,800- 16P- 0.65M - 1.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. The good is 7-11 a. an inferior good since the coefficient on PR is negative. b. a normal good since the coefficient on PR is negative. c. d. e. a normal good since the coefficient on M is greater than one (in absolute value). an inferior good since the coefficient on M is negative. none of the above The estimated demand for a good is Q =4,800- 16P- 0.65M - 1.5PR where Q is the quantity demanded of the good, P is the price of the good, M is income, and PR is the price of related good R. This good and good R are a. b. complements since the coefficient on M is negative. substitutes since the coefficient on M is negative. 7-16 c. complements since the coefficient on PR is negative. d. substitutes since the coefficient on PR is negative. e. none of the above For a linear demand function, Q =a+bP+cM +dPR, the income elasticity is a. b. c. d. e. c. c(M/Q). c(Q/M). c. c(Q/ PR ). 7-17 For a nonlinear demand function of the form , Q =aPbMcPRd , the estimated cross-price elasticity of demand is a. d. b. d. c. d( PR /P). 7-28 d. d (P/ PR ). e. d(Q/ P R ). The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm: Q =a+bP+cM +dPR where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below: Q R-SQUARE F-RATIO P-VALUE ON F 32 0.7984 36.14 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 846.30 76.70 11.03 0.0001 P -8.60 2.60 -3.31 0.0026 M 0.0184 0.0048 3.83 0.0007 PR -4.3075 1.230 -3.50 0.0016 DEPENDENT VARIABLE: OBSERVATIONS: Given the above, based upon the parameter estimates in the above table a. this good is a normal good. b. the related good is a substitute. c. the related good is a complement. d. a and b e. a and c 7-30 The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm: Q =a+bP+cM +dPR where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below: DEPENDENT VARIABLE: Q R-SQUARE F-RATIO P-VALUE ON F 32 0.7984 36.14 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 846.30 76.70 11.03 0.0001 P -8.60 2.60 -3.31 0.0026 M 0.0184 0.0048 3.83 0.0007 PR -4.3075 1.230 -3.50 0.0016 OBSERVATIONS: Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30. At the prices and income given above, what is the price elasticity of demand? a. 0.43 b. 0.86 c. 1.00 d. 1.43 e. 2.40 7-31 The following linear demand specification is estimated for Conlan Enterprises, a price-setting firm: Q =a+bP+cM +dPR where Q is the quantity demanded of the product Conlan Enterprises sells, P is the price of that product, M is income, and PR is the price of a related product. The results of the estimation are presented below: DEPENDENT VARIABLE: Q R-SQUARE F-RATIO P-VALUE ON F 32 0.7984 36.14 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 846.30 76.70 11.03 0.0001 P -8.60 2.60 -3.31 0.0026 M 0.0184 0.0048 3.83 0.0007 PR -4.3075 1.230 -3.50 0.0016 OBSERVATIONS: Assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30. At the prices and income given above, what is the income elasticity? 1.62 0.87 0.21 0.31 1.50 7-1F The estimated market demand for good X is Q =8,000- 25P- 0.12M - 30PG where Q is the estimated number of units of good X demanded, P is the price of the good, M is income, and PGis the price of related good G. (All parameter estimates are statistically significant at the 1 percent level of significance.) Good X is a(n) ______________ good and goods X and G are _________________. At P = $12, M = $30,000, and PG = $50, the predicted quantity demanded is _________ units of good X. At the values in part b, calculate estimates of the following elasticities: Price elasticity: E = _________. 7-2F Cross-price elasticity: E XG = __________. Income elasticity: E M = __________. The empirical demand function is estimated in log-linear form as lnQ =9.61585- 2.2lnP- 0.25ln M +2.6lnPY where Q is the estimated number of units of good X demanded, P is the price of X, M is income, and PY is the price of related good Y. (All parameters estimates are significantly different from zero at the 5 percent level.) a. Good X is a(n) ______________ good and goods X and Y are ____________________. b. Express the empirical demand function in the alternative (non-logarithmic) form: Q = _________________________. c. At P = $3.55, M = $25,035, and PY = $5.07, the predicted quantity demanded is _________ units of good X. d. Calculate the following elasticities: (1) Price elasticity: E = __________. (2) Cross-price elasticity: E XY = __________. (3) Income elasticity: E = __________. M 7-5F A linear trend equation for sales of the form Qt =a+bt was estimated using annual sales data for the period 2006 - 2013 (i.e., t = 2006, 2007, ..., 2013). The results of the regression are as follows: DEPENDENT VARIABLE: QT RSQUARE FRATIO PVALUE ON F 8 0.7034 14.23 0.0093 VARIABLE PARAMETER ESTIMATE STANDARD ERROR TRATIO PVALUE INTERCEPT 23,024,200 8,122,205 2.83 0.0298 T 12,045 6075 1.98 0.0947 OBSERVATIONS: a. b. c. d. At the 10 percent level of significance, the critical value of the tstatistic is _______. The parameter estimate of a ________ (is, is not) statistically significant. The parameter estimate of b ________ (is, is not) statistically significant. The statistical estimates indicate a(n) ___________ (upward, downward) trend in sales of _________ units per year. In the year 2011, sales are forecasted to be ___________ units. In the year 2012, sales are forecasted to be ___________ units