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If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she
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prefers oranges to peaches.
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A typical indifference curve
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Shows all combinations of goods that give a consumer the same level of utility
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The rate at which a consumer is able to substitute one good for another is determined by
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The budget line
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A utility function
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Shows the relation between the amount of goods consumed and a consumer's utility
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Along an indifference curve
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the total satisfaction is the same.
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The slope of an indifference curve is known as
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marginal rate of substitution (MRS), rate at which the consumer is willing to exchange one good for another, utility held constant
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Which of the following assumptions are not made in consumer behavior theory
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Consumers can measure the utility they get from all bundles of goods
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If price decreases, an arrow showing the quantity effect
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Will be shorter than (and opposite direction of) the arrow representing price effect
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Cross price elasticity of demand between goods X and Y
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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"
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marginal revenue
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Both "is the change in total revenue when output increases by one unit" and "measures the slope of the total revenue curve"
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When marginal revenue is positive
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demand is elastic
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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?
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Demand for Houston rockets tickets is price elastic
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Marginal utility is
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the change in utility from consuming an additional unit
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The demand for heart surgery is price inelastic, so it follows that
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if the price of heart surgery increases, total expenditure by consumers on heart surgery will rise.
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If the demand for umbrellas is price inelastic
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if more umbrellas are sold as the result of a price decrease, total expenditures by consumers on umbrellas will decrease.
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If the demand for plastic surgery is price inelastic
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then when more plastic surgery is performed, total expenditures on plastic surgery will decrease.
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Which of the following will not affect the elasticity of demand for a product?
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The cost of producing a product
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An individual's demand curve for X
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Shows how the utility maximizing choice of X changes as the price of X changes
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If the quantity of fidgets demanded increases when the price of gadgets decreases
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Gidgets and gadgets are complements
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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
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the percentage increase in fees will be greater than the percentage decrease in the number of park visitors.
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A production function measures the relation between
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quantity of inputs and quantity of output
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A short run production function assumes that
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at least one input is a fixed input.
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Demand equations derived from actual market data are
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Both "empirical demand functions" and "generally estimated using regression analysis"
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A representative sample
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Both "reflects the characteristics of the population" and "is frequently a random sample"
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One problem with consumer interviews is that
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Both "The sample may not be a representative sample" and "response bias"
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Coefficient for price in a demand equation
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Should be negative to show inverse relationship
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Coefficient for income in a demand equation
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Positive for normal goods, negative for inferior goods
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Coefficient for price of related good in a demand equation
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Positive for substitutes, negative for complements
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If average product is increasing, then marginal product
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must be greater than average product.
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Manager-determined prices are
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Both "not determined by the forces of demand and supply" and "exogenous variables in a demand equation"
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A market-determined price
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Both "is determined by the intersection of demand and supply curves" and "is an endogenous variable"
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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
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
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In the short run all inputs are fixed
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Qualitative Forecasting Methods
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Both "are often the result of expert opinion" and "cannot be replicated by another researcher"
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Checking for individual statistical significance
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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
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Degrees of freedom?
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N (given) - # of coefficients
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