Exam 2 ECON

If price decreases, an arrow showing the quantity effect

Will be shorter than (and opposite direction of) the arrow representing price effect

If the demand for umbrellas is price inelastic

if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.

The demand for heart surgery is price inelastic, so it follows that

if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.

If the quantity of fidgets demanded increases when the price of gadgets decreases

Gidgets and gadgets are complements

One problem with consumer interviews is that

Both "The sample may not be a representative sample" and "response bias"

Qualitative Forecasting Methods

Both "are often the result of expert opinion" and "cannot be replicated by another researcher"

Demand equations derived from actual market data are

Both "empirical demand functions" and "generally estimated using regression analysis"

A market-determined price

Both "is determined by the intersection of demand and supply curves" and "is an endogenous variable"

marginal revenue

Both "is the change in total revenue when output increases by one unit" and "measures the slope of the total revenue curve"

Cross price elasticity of demand between goods X and Y

Both "measures the responsiveness of the quantity of X demanded to changes in the price of Y" and "is greater than zero if X&Y are substitutes"

Manager-determined prices are

Both "not determined by the forces of demand and supply" and "exogenous variables in a demand equation"

A representative sample

Both "reflects the characteristics of the population" and "is frequently a random sample"

Which of the following assumptions are not made in consumer behavior theory

Consumers can measure the utility they get from all bundles of goods

Suppose that the Houston rockets management is considering a plan in which fans who donate blood can attend games for $35 instead of the usual $50. If both ticket revenues and blood donations rise with this plan, which is true?

Demand for Houston rockets tickets is price elastic

Which of the following statements is false? A. In the short run all inputs are fixed B. A firm plans in the long run and operates in the short run C. In the long run, all inputs are variable D. In the short run, a firm can change some but not all of its inputs

In the short run all inputs are fixed

Checking for individual statistical significance

Multiply p value of F • F-ratio to receive critical F, this gives the value to compare to individual values. If all are less than that, it means they are statistically significant

Degrees of freedom?

N (given) - # of coefficients

Coefficient for income in a demand equation

Positive for normal goods, negative for inferior goods

Coefficient for price of related good in a demand equation

Positive for substitutes, negative for complements

Coefficient for price in a demand equation

Should be negative to show inverse relationship

A typical indifference curve

Shows all combinations of goods that give a consumer the same level of utility

An individual's demand curve for X

Shows how the utility maximizing choice of X changes as the price of X changes

A utility function

Shows the relation between the amount of goods consumed and a consumer's utility

The rate at which a consumer is able to substitute one good for another is determined by

The budget line

Which of the following will not affect the elasticity of demand for a product?

The cost of producing a product

A short run production function assumes that

at least one input is a fixed input.

When marginal revenue is positive

demand is elastic

The slope of an indifference curve is known as

marginal rate of substitution (MRS), rate at which the consumer is willing to exchange one good for another, utility held constant

If average product is increasing, then marginal product

must be greater than average product.

If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she

prefers oranges to peaches.

A production function measures the relation between

quantity of inputs and quantity of output

Marginal utility is

the change in utility from consuming an additional unit

The interior department recently announced that it will increase the entrance fees at Yellowstone National park in order to increase park revenues. The interior department must believe that

the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.

Along an indifference curve

the total satisfaction is the same.

If the demand for plastic surgery is price inelastic

then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.