course material

1. econ 315
econ 315econ 315Permalink: https:// /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. DecreaseB. IncreaseC. Remain constantD. 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. HorizontalB. Downward sloping with a slope
always equal to 1C. VerticalD. Either vertical or horizontal 3. As we move down along a
linear demand curve, the price elasticity of demand becomes
moreA. ElasticB. InelasticC. Log-linearD. Variable 4. Suppose the demand for a product is
QXd = 10 – lnPX then product X isA. ElasticB. InelasticC. Unitary elasticD. Cannot be
determined without more information 5. The demand for good X has been estimated by
QXd =12 – 3PX + 4PY. Suppose that good X sells at $2 per unit and good Y sells for $1 per
unit. Calculate the own price elasticity.A. -0.2B. -0.3C. -0.5D. -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. 2.5B. 0.4C. 2.0D. 0.27 7. The demand curve for a good
is horizontal when it is:A. A perfectly inelastic goodB. A unitary elastic goodC. A perfectly
elastic goodD. An inferior good 8. Suppose QXd = 10,000 – 2 PX + 3 PY – 4.5M , where PX =
$100, PY = $50, and M = $2,000. What is the own-price elasticity of demand?A. -2.34B. -
0.78C. -0.21D. -1.21 9. If the cross-price elasticity between good A & B is negative, we know
the goods are:A. Inferior goodsB. ComplementsC. InelasticD. 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. -0.1.17B. 2.71C. 0.42D. -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 lobsterB. 16% increase
in demand for lobsterC. 20% increase in demand for lobsterD. 4% increase in demand for
lobster 12. Suppose the demand for good X is lnQXd = 21 – 0.8 lnPX – 1.6 lnPY + 6.2 lnM +
0.4 lnAX. Then we know goods x and y are:A. SubstitutesB. ComplementsC. Normal
goodsD. Inferior goods 13. Suppose the demand function is given by QXd =
8PX0.5 PY0.25 M0.12 H. Then the demand for good X
is:A. InelasticB. UnitaryC. ElasticD. Perfectly elastic 14. Which of the following is used to
determine the statistical significance of a regression coefficient?A. T-statisticB. F-
statisticC. R-squareD. Adjusted R-square 15. Which of the following provides a measure of
the overall fit of a regression?A. T-statisticB. F-statisticC. R-squareD. The F-statistic and R-
square 16. Which of the following measures of fit penalizes a researcher for estimating

2. many coefficients with relatively little data?A. T-statisticB. R-squareC. Adjusted R-
squareD. Neither the t-statistic, R-square nor the adjusted R-square 17. The demand for
good X is estimated to be QXd = 10,000 – 4PX + 5PY + 2M + AX, where PX is the price of X,
PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the
present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. What is the
own-price elasticity of demand for good X?A. -0.003B. -0.03C. -0.3D. -3 18. The demand for
good X is estimated to be QXd = 10, 000 – 4PX + 5PY + 2M + AX, where PX is the price of X,
PY is the price of good Y, M is income and AX is the amount of advertising on X. Suppose the
present price of good X is $50, PY = $100, M = $25,000, and AX = 1,000 units. Based on this
information, the cross price elasticity between goods X and Y isA. 0.008B. -0.08C. -0.8D. -
8 19. The lower the standard error,A. The less confident the manager can be that the
parameter estimates reflect the true valuesB. The more confident the manager can be that
the parameter estimates reflect the true valuesC. The more precisely the parameter
estimates the true valuesD. 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 isA. Less than
1B. Less than 2C. Greater than 1D. Greater than 2 21. Suppose a consumer with an income of
$100 who is faced with PX = 1 and PY = 1/2. What is the market rate of substitution
between good X (horizontal axis) and good Y (vertical axis)?A. 0.50B. -1.0C. -2.0D. -
4.0 22. The difference between a price decrease and an increase in income is thatA. A price
decrease does not affect the consumption of other goods while an increase in income
doesB. An increase in income does not affect the slope of the budget line while a decrease in
price does change the slopeC. A price decrease decreases real income while an increase in
income increases real incomeD. 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 intersectB. At a point of consumer equilibrium, the MRS equals 1C. If income
increases, a consumer will always consume more of a goodD. 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 betterB. CompletenessC. SubstitutabilityD. Complementarity 25. The absolute value of
the slope of the indifference curve is called the:A. Marginal revenueB. Average rate of
substitutionC. Marginal rate of substitutionD. 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 lineB. Increase the vertical interceptC. Decrease the horizontal
interceptD. Parallel inward shift of the line 27. Which of the following cases violates the
property of transitivityA. A∽B, B∽C, A∽CB. A≻B, B≻C, A≻CC. A≻B,
B≻C, C≻AD. 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 PX = $5, PY = $10, X = 20, and M =
500?A. 40B. 25C. 50D. 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 increasesB. It decreasesC. Remains
unchangedD. 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 axisA. The

3. 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 pricesB. MRS < PX /PYC. MRS < – PX /PYD. 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